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New York State Makes Retirement Savings Program Mandatory Through Payroll Deduction

New York state employers that do not offer a qualified retirement plan will soon be required to auto-enroll their employees into a state-managed retirement program.
December 21, 2021
New York State Makes Retirement Savings Program Mandatory Through Payroll Deduction

New York State Makes Retirement Savings Program Mandatory Through Payroll Deduction

New York state employers that do not offer a qualified retirement plan will soon be required to auto-enroll their employees into a state-managed retirement program.

On October 21, 2021, Governor Kathy Hochul of New York signed into law a bill that expands the New York State Secure Choice Savings Plan (Savings Plan) into an auto-enrollment program. The program was originally created as part of the 2018-2019 New York State Budget as a voluntary program whereby workers employed in New York could opt into the program to save money for retirement in a state-run IRA through post-tax payroll deductions. Although the voluntary opt-in program has not yet been established, the new law now mandates covered employers to auto-enroll employees unless the employee affirmatively opts out. Contributions are strictly from employee post-tax money, not from employers.

To be covered by the new law, the employer must (i) have had at least 10 employees in the state “at all times during the previous calendar year,” (ii) have been in business for at least 2 years, and (iii) not already offer “a qualified retirement plan, including, but not limited to, a plan qualified under sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p) or 457(b) of the Internal Revenue Code of 1986 in the preceding two years.” As the common law employer of the production workers, motion picture production companies serve as the employer for purposes of this law.

As a sigh of relief, employers that already offer a “qualified retirement plan” are exempt from the law. In the motion picture industry, many collective bargaining agreements require mandatory contributions on behalf of employees to a multi- employer pension fund, which may constitute a 401(a) plan. Eligible motion picture production company employers that are signatory to such collective bargaining agreements may therefore be exempt from the new law. If applicable, this exclusion would apply at an employer level (and not at an individual employee level) and therefore would exempt the employer from complying with the new law for their non-unionized employees as well.

In addition to auto-enrolling employees and remitting funds to the Savings Plan from payroll deductions, employers will need to provide informational materials to employees about the program, how to opt out of the program, how to select their percentage contributions (default is 3% of post-tax payroll deduction), the yearly open enrollment period and other relevant information. These materials will be created by the state and are not yet available.

As the hiring and controlling employer, the production company is responsible for distributing the Savings Plan materials and collecting any necessary forms from its production workers along with other onboarding paperwork. Similar to the Cal-Savers mandatory payroll deduction program in California, EP will be prepared to assist production companies with the payroll deductions. It is unknown at this time if there will be any penalty imposed on employers for failing to comply with the law.

As of now, the program is not yet open, and we expect the state to enact regulations for the program. Once the program is open (opening date is unknown at this time but expected to be sometime in 2022), our information is that employers will have up to 9 months to enroll their employees in New York into the program and start payroll deductions.

Earlier this year, New York City also passed a mandatory auto-enrollment IRA law covering private businesses. The City’s program is not yet established, but the New York State law now calls into question the fate of the City’s program as the State’s program will cover most of the same employers that the City’s program will cover. We are waiting for further information from the State or City on the future of the City program.

We recommend that you consult with your legal advisors regarding this new law and its applicability to your company.

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For any questions about this Alert, you may contact:

Alan Wu, Director, Employment & Labor Relations Counsel | awu@ep.com

Scott Bishop, Vice President, Employment Law | sbishop@ep.com

Joe Scudiero, Senior Vice President & Chief Labor Counsel | jscudiero@ep.com

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