New York state ratifies a retirement plan initiative that will create retirement pension plans for workers who need them. The New York Secure Choice Savings Program will start sometime in 2019.
It is a retirement savings plan for employees who work for companies that don’t offer them a 401(k) package. About one-third of working Americans don’t have access to a plan through, work, and even then two-thirds who do, don’t contribute to them.
“For years, we have been working to develop and pass a retirement program that would give millions of New Yorkers the opportunity to save for their futures,” said New York Gov. Cuomo in a statement.
“In this year’s budget, we proposed and passed a commonsense, progressive reform that will strengthen our workforce.”
The retirement pension plan will benefit independent contractors, freelancers and small businesses who don’t get to benefit from such pensions or 401(k) plans through their jobs.
All 401(k) plans are portable, but having one run by the state means workers would not need to even move them if they changed companies, and presumably the state government will be better able to negotiate fees compared to a single small business.
Employees who decide to enroll can opt to have a portion of their paycheck added to a Roth IRA or similar pension program.
A Roth IRA, or Individual Retirement Account, is not tax deductible. However, Roth IRAs accrue tax-free and withdrawals from Roth accounts are not subject to tax.
A New York state board of seven government authorities will work out the specific policy details of the plan to come.
While the creation of the program is welcome news to many workers without retirement plan packages, the retirement program will be entirely voluntary for businesses and employees.
New York is the latest in a number of states to legislatively implement a government approved retirement plan since 2012.
More than 40 states will initiate or legislatively consider implementing similar retirement plans, including California, Connecticut, Illinois, Maryland, Vermont and Washington.
Oregon was the first state to enact such a measure in 2017.
Official research estimates by AARP conclude that over 57 million private sector employees work at companies without any retirement plan.
Once enacted, the New York Secure Choice Savings Program may reach 3.5 million employees working without a 401(k) or retirement savings plan.
AARP New York State Director Beth Finkel applauded the initiative.
“Secure Choice will offer hardworking men and women across New York an easy and effective way to save for their futures through payroll deduction,” Finkel said.