The American Retirement Association (ARA) has raised concerns with the New York City Council about the application of ERISA in relation to a retirement savings program for private-sector employees under consideration.
In a Sept. 23 hearing before the NYCC’s Committee on Civil Service and Labor, ARA General Counsel Allison Wielobob explained that the ARA strongly supports the goal of helping New Yorkers strengthen their retirement security, but emphasized that it is critical that additional burdens not be placed on employers that already offer a qualified retirement plan regulated by federal law.
In her testimony, Wielobob urged council members to automatically exempt employers that sponsor an ERISA-covered retirement rather than base applicability on the meaning of “eligible employee.” Explaining that the ARA is concerned that the proposal under consideration overlaps with ERISA’s comprehensive governance of private-sector retirement plans, she urged the council to include explicit language that exempts ERISA plans, and noted that similar programs and proposals in several other states – including Oregon, California, Illinois, Maryland and New Jersey – exempt employers that offer an ERISA-covered plan to their employees.
“The ARA believes that any requirements placed on employers should be designed to minimize the burden on the employer while promoting the desired policy outcome of increasing the availability of workplace savings arrangements,” Wielobob stated.
Additionally, the ARA recommended that employers which do not currently sponsor a retirement plan should not be required to use the city’s retirement savings options, as the legislation does. “Rather, we suggest that the proposal permit employers to choose a payroll deduction IRA or qualified plan from the marketplace,” she noted.
City-Sponsored Plan
The hearing was in relation to legislation (Int. No. 0888-2018) under consideration by the NYCC sponsored by council member Ben Kallos to establish an IRA program for private-sector workers at businesses with 10 or more employees located in New York City that do not already offer retirement savings plans.
The bill would require a covered employer to automatically enroll eligible employees in accounts established by the program through payroll deduction or any other method of contribution established by a retirement savings board. It also would allow employees to opt out of the program, as well as establish a default contribution rate of 3% of an eligible employee’s income. Employers would not be permitted to make contributions, but employers would have responsibility for enrolling employees and remitting funds deducted from the earnings of each participating employee for deposit in the retirement savings program.
The council is also considering legislation (Int. No. 0901-2018) sponsored by council member I. Daneek Miller, who chairs the Committee on Civil Service and Labor, that would establish a retirement savings board to oversee the city’s retirement savings program for private sector employees.
Eligibility Conditions
Wielobob’s testimony also raised concern about the proposal’s eligibility conditions, requiring employees age 18 years and older be covered by the plan. She contended that the proposal should not apply to employers that sponsor plans with eligibility conditions that comply with ERISA, which precludes an employer from restricting eligibility for the retirement plan beyond one year of service (1,000 hours in a year) and attainment of age 21. During the hearing, Kallos indicated that he is open to changing the eligibility requirement in his legislation to age 21.
Moving Forward
While this legislation was introduced in 2018, it appears to build off a promise made by Mayor Bill de Blasio. In his State of the City Address delivered in January 2019, de Blasio promised to work with the City Council to pass legislation in 2019 that provides access to IRAs for all working New Yorkers who do not have access to employer-provided savings plans.
In 2016, New York City Comptroller Scott Stringer unveiled a similar city-run retirement plan for private sector workers, including a city-sponsored multiple employer plan (MEP), but it wasn’t pursued in the wake of legislation signed by President Trump that blocked the Obama-era DOL’s safe harbor exempting states’ and municipalities’ auto-IRA programs from ERISA.
In April 2018, New York State approved the New York State Secure Choice Savings Program, a payroll deduction IRA retirement savings program, for employees who are not offered a plan through their employer. That program is voluntary, however, which appears to be one of the main thrusts as to why the Big Apple continues to push forward with its own plan.
If the legislation is approved by the city council, it would take effect 180 days after it becomes law.
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