About 1.7 million New Jersey workers do not have access to a retirement plan through their employers.
But that’s going to change.
Gov. Phil Murphy on Thursday signed into law the New Jersey Secure Choice Savings Program Act at the senior center in Saddle Brook.
The plan, which is meant to confront the state’s retirement security crisis by giving workers greater control over their financial future, will give private-sector workers the option to automatically enlist in a state-managed Individual Retirement Account, or IRA.
The act also makes it mandatory for employers with 25 employees or more to partake in the retirement savings program administered through automatic payroll deductions.
“The Secure Choice bill gives private-sector employees a convenient and an efficient way to save for their retirement,” said Saddle Brook Mayor Robert D. White.
Established as part of the bill is the New Jersey Secure Choice Savings Board, which will manage the fund. The board includes the state treasurer, comptroller, director of the Office of Management and Budget, two public representatives, a business trade organization representative and a representative of the enrollees.
Statewide Hispanic Chamber of Commerce of New Jersey Chairman Luis De La Hoz said this piece of legislation is an important step for New Jersey people, as the bill makes it possible to save money for retirement without generating any additional cost for the employer. And this, De La Hoz said, will help small businesses and their owners, in particular.
“Today, New Jersey is taking a bold step toward building the retirement security of millions of residents,” Murphy said to the room of local and state government officials and community advocates.
But he said the bill is three years overdue.
“Former Gov. (Chris) Christie vetoed the 2016 proposal while he was running for president, and I can’t for the life of me figure out why, because this is not a Democrat or a Republican thing, this is a smart thing,” Murphy said.
Murphy said that, after all other expenses, writing another check into an IRA just doesn’t happen for most, so they look to Social Security. But, while it’s a nice safety net, Murphy said, it is not a retirement plan.
“When companies do not offer automatic savings deductions, employees are less likely to save,” said Assemblyman Roy Freiman (D-Hillsborough).
An important point Murphy made sure to make was how a Secure Choice IRA is completely portable, so as residents change workplaces along their career paths, they won’t have to open a new IRA each time.
“We’re facing a retirement crisis,” Murphy said. “The fact is, more and more New Jerseyans are facing the prospect of retirement without adequate savings to ensure dignity throughout their retirements. We must do more.”
AARP has long been lobbying for this bill, since before it was sent through Christie’s administration. Evelyn Liebman, AARP director of advocacy, believes the state took a monumental step to help New Jersey workers enjoy a more secure financial future.
“Secure Choice has now passed twice with bipartisan support in the New Jersey Legislature — and, thanks to Gov. Murphy, the dogged determination of advocates across the state and legislative champions, this time, it’s for real,” said Liebman.
According to AARP, 72 percent of workers employed by businesses with fewer than 100 employees do not have a pension or retirement plan. Additionally, the average Social Security benefit for a 65-plus family is approximately $19,000 a year although, on average, older New Jersey families spend $23,000 a year on food, utilities, and health care alone.
The law was introduced in June of last year, passed by the Senate in February of this year and passed by the Assembly a few days later. It is to take effect immediately, but Murphy said it’ll take about a year and a half to get the Secure Choice Savings Program up and running.