A year after New Jersey launched a long-awaited retirement savings option for private-sector workers, lawmakers want to make more residents eligible to participate.
Branded RetireReady NJ, the state-administered — but not state-funded — retirement savings plan was initially required to be made available to the employees of businesses with 25 or more workers who do not already have access to retirement savings options provided by their employers.
Lawmakers now want to modify the rules governing RetireReady NJ to require the owners of smaller businesses to provide their employees with a way to enroll in the retirement savings plan.
RetireReady NJ currently offers enrollees both Roth and traditional individual retirement accounts, commonly referred to as IRAs.
Legislation cleared unanimously by a key Assembly committee on Thursday calls for expanding eligibility for the program by reducing the “threshold for required participation … from businesses that have 25 or more employees to businesses that have one or more employees.”
Who’s for, who’s against?
The proposed policy change drew strong praise from the AARP advocacy organization, whose representatives pushed for RetireReady NJ’s establishment several years ago, citing concerns about a “retirement crisis.”
“Without access to a retirement-savings plan at work, nearly all workers fail to save. It’s just behavioral economics,” said Evelyn Liebman, director of advocacy for AARP New Jersey, during Thursday’s hearing.
Businesses that are required to offer the retirement savings option and pre-tax payroll deduction to their workers are not required to make any matching contributions.
Several business-lobbying groups testified against the measure prior to Thursday’s vote. They suggested expanding the mandate would create a significant burden on the state’s smallest employers since many operate with only limited administrative capabilities.
“These small businesses do want to follow the regulations and the rules, but with limited time and resources, this bill could make it much harder to do so,” said Hilary Chebra, director of government affairs for the Chamber of Commerce of Southern New Jersey.
“It’s a difficult time to run a small business right now,” Chebra said.
Not a common feature of private employment in NJ
Lawmakers initially worked with Gov. Phil Murphy several years ago to pass a private-sector retirement savings measure that was called the Secure Choice Savings Program Act.
Citing studies that indicated a large share of New Jersey’s working population lacks access to an employer-provided retirement account, sponsors at the time pushed for a new plan that would enable these private-sector workers to make deposits into a retirement savings account, automatically and on a pre-tax basis.
At the national level, a 2022 study by the U.S. Federal Reserve indicated nearly half of all families in the U.S. have no retirement account.
And in more recent years, concerns about low rates of retirement savings have only increased amid a series of high annual rates of inflation that have added to the financial challenges faced by many older residents in New Jersey, which is known for being one of the nation’s highest-cost states.
Following the lead of other states
The RetireReady NJ concept was modeled on successful state-sponsored retirement systems for private-sector workers in other states, including Illinois, according to AARP.
During Thursday’s Assembly State and Local Government Committee meeting, Liebman said the proposed expansion would “serve a critical need” in New Jersey.
“This is especially important for small businesses and their employees,” Liebman said. “The smaller the employer, the less likely its workers are to have access to any kind of retirement plan.”
Since it came online, first as a pilot program in April 2024, thousands of residents have enrolled in RetireReady NJ.
Under the 2019 law that allowed for the establishment of the retirement savings plan, which was rebranded as RetireReady NJ before its debut, no worker in New Jersey is forced to participate in the savings program.
Businesses required to offer the retirement savings option and pre-tax payroll deduction to their workers are also not required to make any matching contributions.
The state doesn’t pay
Meanwhile, the state is not responsible for funding any benefits, and the program itself is being administered by a seven-member board overseeing an outside investment firm. All the money in RetireReady NJ comes from the employees who enroll in the program.
Since it came online, first as a pilot program in April 2024, thousands of residents have enrolled in RetireReady NJ, generating more than $1 million in savings for enrolled participants as of the end of last year, according to data discussed during public meetings held by the savings plan’s board.
The legislation seeking to expand eligibility to the employees of smaller businesses was cleared by the Assembly committee with bipartisan support, in a 7-0 vote.
If the measure wins approval in both full houses of the Legislature, and earns Murphy’s endorsement, the new requirement would go into effect three months following its adoption, according to the bill.
