New Jersey will move forward with a new state-run retirement program, but it won’t resemble the bill New Jersey legislators put on the Governor’s desk last week.
Gov. Chris Christie issued a conditional veto of that bill, which would have created the Secure Choice retirement program, and required New Jersey businesses with at least 25 employees to enroll workers in the program at a 3 percent deferral rate.
Employers would not have been required to make contributions, and workers would have had the right to opt out of the plan.
In his conditional veto, Christie wrote, “I believe that the approach taken by the Legislature-- mandating participation under a threat of fines for not participating-- is unnecessarily burdensome on small businesses in New Jersey.”
Christie also said the fact that the state would bear the initial start up costs of the program, and administrative burdens, were non-starters.
“The bill creates yet another government bureaucracy to oversee and implement the program, while there are plenty of private sector entities with particular expertise that can perform this function instead,” he said.
In lieu of the original bill, which passed both chambers in the New Jersey legislator with bipartisan support, Christie’s veto created the New Jersey Small Business Retirement Marketplace Act.
It is modeled on the private exchange recently created in the state of Washington.
The exchange is intended to educate small business owners on retirement plan options, while creating a marketplace for private-sector providers that will only promote, but not mandate, participation in “qualified, low-cost, low-burden” retirement plans.
Christie’s amendments to the bill also said the exchange will promote the myRA program, the low-cost savings vehicle rolled out by the Treasury Department this year.
Roughly 1.7 million private sector workers in New Jersey are without access to a workplace savings plan. In issuing his conditional veto, which the legislature passed hours later, Christie noted that Washington’s exchange was legislated into effect with the blessings of the AARP.
Under New Jersey’s exchange, the state Treasurer is charged with approving plan options from the private sector, and will oversee the marketing effort and the creation of a new website supporting the exchange.
At least two types of plans will be offered: A SIMPLE IRA, which allows employers to make contributions, and a plan that will allow employers to deduct employee contributions without contributions from sponsors.
Private sector providers will have to provide a minimum of two investment options: a target-date fund and a balanced fund. The myRA plan will be offered in addition to the private plan.
The new exchange does not put a limit on the number of private-sector providers, so long as they are qualified by the state Treasurer.
New Jersey’s Assembly voted unanimously to the changes Gov. Christie insisted. The Senate then voted its approval just before the legislative term expired on Tuesday.
"It's not what I intended, but it's a step forward. I plan to revisit the issue next session," said Assembly Speaker Vincent Prieto, according to reporting in NJ.com.
Business interest groups were leery of the employer mandate in the original bill.
"This was important to protecting businesses against unnecessary additional mandates and burdensome costs," said Mike Wallace, policy director at the New Jersey Business and Industry Association, as reported in NJ.com.
The marketplace will "ensure that employers have a safe and low-cost retirement savings option to offer their employees," he said.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
