New York City Council Imposes Self-IRAs for Small Businesses

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New York City The Council passed a bill making a self-enrolling individual retirement account program mandatory for employees of private sector companies that do not offer a pension plan and have five or more workers.

The bill goes into effect in 90 days, but the city pension security council, which the city council created in complementary legislation, has up to two years to implement the program.

The default employee contribution rate under the new plan would be 5%, up to the maximum annual IRA contribution of $ 6,000 (or $ 7,000 for those aged 50 or over). But employees can adjust that contribution rate up or down, or opt out of the Automatic IRA at any time. The plan would be transferable and employers would not have to contribute on behalf of employees.

Of an estimated 3.5 million private sector workers in New York City, only 41% have access to an employer-sponsored pension plan, below the national average (53%) and down from 49% there is ten years old, the city said in a statement, noting that 40% of New Yorkers nearing retirement age have less than $ 10,000 saved for retirement.

States have been at the forefront of establishing self-ARI programs, with programs currently operational in states such as California, Illinois, and Oregon. But until the move from New York City, Seattle was the only city to have an auto-IRA in place.

[More: Auto-IRA states, AARP blast CalSavers lawsuit claims]

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