N.J. blazes a trail on retirement saving
New Jersey has become one of the first states in the nation to establish a state-run marketplace for small businesses to set up retirement accounts.
New Jersey has become one of the first states in the nation to establish a state-run marketplace for small businesses to set up retirement accounts.
The New Jersey Small Business Retirement Marketplace Act, signed Jan. 19, loosely follows the "Work and Save" program pushed by the AARP, the lobbying group for retirees.
AARP's main program would have required businesses with 25 or more employees to provide a retirement plan or enroll employees in a state-administered marketplace offering individual retirement account (IRA) options.
The mandatory provision was part of a bill originally passed by both houses, but it was vetoed by Gov. Christie, who made participation voluntary for businesses.
That approach won kudos from the New Jersey Business and Industry Association, which said it would protect businesses from "unnecessary mandates."
AARP associate director Brian McGuire said the new law does too little to address the fact that 1.7 million private-sector employees lack retirement savings in New Jersey.
Under both approaches, the state's treasury department would vet financial plans, typically IRAs. In Christie's version, employers pick among the plans; in the earlier version, employees would have made the choice.
Both plans would protect employers from administrative fees, and account holders will pay no more than 1 percent to the bank or investment firm holding the account.
Small-business owners avoid setting up plans because "it's administratively hard," said Elaine Ryan, AARP's state legislative director.
They have to sort through offers from financial services companies and often face high fees, daunting paperwork, and liability issues based on federal retirement security laws.
The AARP program, which had bipartisan support, avoided all those liabilities, because the state would have administered the system, and the employees would have made their own picks.
"By doing it statewide, you'd have many more participants," Ryan said, noting that workers can always open their own accounts, but tend to save more through a payroll deduction.
Ryan said 16 other states, but not Pennsylvania or Delaware, were considering some version of AARP's "Work and Save." New Jersey's plan is in development and probably will be at least until 2017.
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