The New York City Council has passed a bill mandating an auto-enrollment individual retirement account program for employees of private-sector firms that do not offer a retirement plan and have five or more workers.
The bill takes effect in 90 days, but the city retirement security board, which the City Council created in companion 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 annual IRA maximum contribution of $6,000 (or $7,000 for those who are 50 or older). But employees can adjust that contribution rate higher or lower, or opt out of the auto IRA at any time. The plan would be portable and employers do not have to contribute on behalf of employees.
Out of roughly 3.5 million private-sector workers in New York City, only 41% have access to an employer-sponsored retirement plan, lower than the national average (53%), and down from 49% a decade ago, the city said in a release, noting that 40% of New Yorkers near retirement age have less than $10,000 saved for retirement.
States have been at the forefront of establishing auto-IRA programs, with programs currently up and running in states including California, Illinois and Oregon. But until New York's move, Seattle was the only city to have set up an auto-IRA.
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