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On March 28, 2019, New Jersey became the sixth state to pass legislation requiring that certain employers offer to employees a state-sponsored individual retirement account (“IRA”) program with automatic enrollment and pre-tax payroll deduction contributions (the “NJ Auto-IRA Law”). “By creating the Secure Choice Savings Program, we are ensuring that every worker in New Jersey will have the opportunity to save for the future,” New Jersey Governor Phil Murphy stated when he signed the program into law.

New Jersey joins California, Connecticut, Illinois, Maryland, and Oregon in offering auto-IRA programs. Other states, including Washington, are considering offering similar programs.

Who Is Subject to the NJ Auto-IRA Law?

Employers will be subject to the NJ Auto-IRA Law and required to automatically enroll their employees in the New Jersey Secure Choice Savings Program (the “Program”) if they:

  • Employed no fewer than 25 employees at all times in New Jersey in the prior year;
  • Have been in business for at least two years; and
  • Have not offered a qualified retirement plan (e.g., a 401(k) plan or 403(b) plan or a plan sponsored by an employee leasing company or professional employer organization that the employer has used in the preceding two years).

Employers subject to the NJ Auto-IRA Law include for-profit and non-profit employers, but do not include any governmental employers in New Jersey.

What Is the Deadline to Comply with the NJ Auto-IRA Law?

Implementation of the Program and the beginning of employee enrollment are to occur by March 28, 2021, which is 24 months after the effective date of the NJ Auto-IRA Law. However, the NJ Auto-IRA Law allows the New Jersey Secure Choice Savings Board (the “Board”), which will administer the Program, to extend the time period for implementation by up to 12 months.

What Will Employers Need to Do to Comply with the NJ Auto-IRA Law?

Distribute an Information Packet on the Program, Prepared by the Board

For the first six months following the opening of the Program, the Board will provide a process by which employers may register for the Program. Participating employers will be required to distribute an employee information packet prepared by the Board to (1) existing employees, upon the implementation of the Program, and (2) new employees, at the time of hire.

Set Up a Payroll Deposit Retirement Savings Arrangement for Automatic Enrollment

Employers subject to the NJ Auto-IRA Law must set up a payroll deposit retirement savings arrangement no more than nine months after the Board opens the Program for enrollment, and automatically enroll any employees who have not opted out of the Program.

Deposit Employee Payroll Deductions into the Program Fund

Participating employers must deposit employee payroll deductions into the New Jersey Secure Choice Savings Program Fund (the “Program Fund”).

Offer an Annual Open Enrollment Period Following Initial Implementation of the Program

Following the initial implementation of the Program, participating employers must offer an open enrollment period, at least once every year, to allow employees who originally opted out of the Program to enroll.

Enroll a New Employee No Later Than Three Months Following the Date of Hire

No later than three months following the date of hire, employers must also enroll an employee hired more than six months after the Board opens the Program for enrollment, unless that employee opts out of the Program prior to automatic enrollment.

What Penalties Apply for Noncompliance with the NJ Auto-IRA Law?

The NJ Auto-IRA Law imposes various penalties—ranging from a warning to a $500 per employee fine—upon employers for failing to timely enroll employees in the Program. The potential penalties will increase over the course of the Program’s implementation and over multiple violations.

Employers that collect employee contributions but fail to deposit any portion of the contributions to the Program Fund will be subject to (1) a penalty of $2,500 for a first offense and (2) a penalty of $5,000 for the second and each subsequent offense.

What New Jersey Employers Should Do Now

Given that the implementation of the Program and the beginning of employee enrollment in the Program are to occur by March 28, 2021, New Jersey employers that will be subject to the NJ Auto-IRA Law do not need to take action for compliance at this time. However, these employers may want to do the following now:

  • Consider whether to establish a qualified retirement plan instead of having to comply with the NJ Auto-IRA Law (assuming it is not preempted by federal law[1]); and
  • Continue to monitor the New Jersey Department of Treasury’s website for further guidance on compliance with the NJ Auto-IRA Law.


For more information about this Advisory, please contact:

Sharon L. Lippett
New York

Rina Fujii
New York

IRS Circular 230 Disclosure: To ensure compliance with certain IRS requirements, we inform you that any tax advice contained in this publication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.


[1] There have been questions as to whether state auto-IRA programs are preempted by federal law. The CalSavers Retirement Savings Program, California’s Auto-IRA program under the California Secure Choice Retirement Savings Trust Act (the “CalSavers Program”), has been in the news as of late because a federal court recently held that the CalSavers Program is not preempted by the Employment Retirement Income Security Act of 1974 (ERISA).

The NJ Auto-IRA Law addresses ERISA preemption concerns. It expressly requires that the Board request in writing an opinion (presumably from the United States Department of Labor) as to the ERISA status of the Program. In addition, the NJ Auto-IRA Law expressly states that the Program is not an “employer-sponsored plan and it is not operated or administered by the employer” and that a “participating employer shall not be a fiduciary, or considered to be a fiduciary.”

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