New York City Mayor Bill de Blasio signed into law legislation that will require private-sector employers located in New York City to provide a mandatory retirement savings program for their employees.
The legislation creates a mandatory auto-enrollment payroll deduction IRA program for employees of private-sector employers that employ five or more employees and do not currently offer a qualified retirement plan.
While employers aren’t going to be required to contribute employer contributions to the plans, the law will require employers to enroll employees who are age 21 or over and work at least 20 hours a week.
Under this new law, the default employee contribution rate will be 5% but will allow employees to opt-out or adjust the rate as they deem fit, up to an annual IRA maximum of $6,000 (or $7,000 for those age 50 or above) (2021 numbers).
I’m all for increased retirement plan coverage and I believe that this new law will spur New York City employers that will be required to offer a Mandatory IRA will seek a pooled employer plan or single-employer plan, rather than dealing with a government IRA program.