New York City Mayor Bill de Blasio has proposed creating a city-managed individual retirement account program that would aid private-sector workers whose employers don't offer retirement savings plans.
"Nearly half of the workforce in this city, 2 million of us, don't have employer-sponsored retirement plans," Mr. de Blasio said Thursday during his annual state of the city speech. "So we're going to establish retirement plans for any worker who doesn't have one."
The proposal, which must be approved as legislation by the City Council, is similar to so-called secure choice programs now being offered or being developed by several states, including Oregon and California. If legislation is approved this year, the program could take effect in 2021, according to a fact sheet issued by the mayor's office. The mayor's proposal says:
• Employers with at least five employees that don't offer a retirement plan will be required to auto-enroll their employees into the city-sponsored plan with a 5% of salary default contribution.
• The contribution works as a payroll-deduction into a Roth IRA, and it can be transferred if participants change jobs.
• Employees can opt-out at any time and can reduce or increase contributions up to the annual Roth IRA maximum, which is $6,000, or $7,000 for people 50 and older, for this year.
Employers won't contribute to this program, Raul Contreras, a spokesman for Mr. de Blasio, said in an interview. Although the city will pay for start-up costs, the program will be maintained by fees charged to participants' accounts.
This Retirement Security Fund will be governed by a board of directors, managed by a private third-party administrator and provide low-cost index mutual funds for the investment menu, the fact sheet said.
Mr. de Blasio's proposal differs from legislation signed into law in April 2018 by Gov. Andrew Cuomo establishing a Secure Choice Savings program for New York state in which participation by both workers and employers is voluntary. Depending on adequate funding, the New York state program is expected to take effect in the spring of 2020.
Mr. de Blasio's proposal is similar to one he offered in 2016, but he didn't pursue it when President Donald Trump rescinded regulations issued during President Barack Obama's administration that said state- and municipal-run IRA programs would not be subject to the Employee Retirement Income Security Act. Several states have taken steps to account for the loss of the ERISA-exemption rules. There's also legislation in the City Council — introduced in August 2017 and reintroduced in May 2018 — that is similar to Mr. de Blasio's proposal. It contains the auto-enrollment Roth IRA features, the opportunity for employees to opt out and the requirement that employers enroll their workers. This bill covers employers with more than 10 workers and sets the initial default contribution rate at 3% of salary.