New York City's Mandatory Retirement Savings Program for Private Employers

Many New Yorkers have faced substantial economic difficulties over the last fourteen months due to COVID-19 and they may have delayed saving for retirement. Some New Yorkers may have even dipped into their retirement or other savings during this global pandemic. In order to assist New York City employees with saving for retirement, the New York City Council passed a law last week mandating covered private employers to give covered employees over the age of 21 the opportunity to contribute to accounts created by the newly established “Savings Access New York Retirement Program” (hereafter, “the Program”). Covered private employers are those with five or more employees who have not previously maintained a retirement plan in the last two years. Covered employees must work for their employer at least twenty (20) hours per week and their regular duties must occur in New York City. The Program will provide a default employee contribution rate of 5%, which employees can adjust up or down, or opt-out of at any time, up to the annual IRA maximum of $6,000 (or $7,000 if age 50 or above). The accounts will be portable, so when employees switch jobs, they can continue to contribute or roll over their accounts into other retirement savings plans. Employers will not be required contribute on behalf of employees. This law would take effect on August 9, 2021. 
This new law also establishes a Retirement Savings Board (the “Board”) to be responsible for drafting regulations to implement the law. Employers will have to enroll their employees in the Program and make required deductions by a date specified by the Board. In addition to enrolling employees and making deductions from paychecks, employers will have to maintain records of their compliance for three years and provide certain information and disclaimers to employees who participate in the Program. 
The Mayor will designate an office or agency to enforce the law. The law provides for penalties for employers who violate their obligations which are assessed for each covered employee. Employers will be subject to a $250 fine for an initial violation of failing to enroll each employee or make the deductions. If an employer violates the law a second time within two years of the first violation, the fine increases to $500. Any subsequent violations within that two-year timeframe after the first violation may be up to $1,000. Employers who fail to properly retain records will also be subject to a $100 fine for each violation. Employees have the right to sue employers for violations of this law in certain situations and may be entitled to any appropriate legal and equitable relief, including costs and attorneys’ fees. The New York City Corporation Counsel can also bring lawsuits on employees’ behalf.  
Certain questions remain open concerning this new law and the Program, such as: (1) is the law preempted by the Employee Retirement Income Security Act of 1974 as amended, the federal law governing certain employee benefits; (2) will the Program eventually be discontinued if the State creates a similar plan, or if the Office of Management and Budget and Comptroller indicate the Program creates a liability or obligation beyond the ordinary cost of administration; and (3) how will employers track the hours and duties of those employees working from home for purposes of determining whether those employees are covered by the new law.  
We will update you as questions are answered and further guidance is released. If you have questions, please contact the authors or another Clifton Budd & DeMaria attorney.

Authors:Leighann George and David P. Ofenloch