RetireReady NJ

by: Kristin Tocket, CPC, QPA, QKA, TGPC

Following the lead of several other states, New Jersey implemented its own mandated retirement program: RetireReady NJ. This program went into effect on June 30, 2024, and is mandatory for businesses that have been established for at least two years, have more than 25 employees and do not offer one of the following types of retirement plans:

● 401(a) - Including a 401(k) plan
● 403(a) - Qualified annuity plan
● 403(b) - Tax-sheltered annuity plan
● 408(k) - Simplified Employee Pension plan (SEP)
● 408(p) - SIMPLE IRA plan
● 457(b) - Governmental Deferred Compensation Plan 

Employers with 40 or more employees were required to comply by September 15th, 2024, while employers with 25 to 39 employees had a deadline of November 15th, 2024. To be in compliance, an employer must either implement the RetireReady NJ program by their respective deadline or certify their exemption here by visiting the RetireReady website (Employer Verification).  

They will need their EIN and the Access Code provided in the notices mailed by the NJ Department of the Treasury. If an Employer did not receive a notice, or cannot locate their Access Code, they can retrieve it by visiting the 

RetireReady website (Request Access Code).  

It’s important that employers subject to the mandate certify their exemption in a timely manner. Businesses with 40 or more employees that do not comply by June 15th, 2025, or businesses with 25-39 employees that do not comply by August 15th, 2025, will receive a written warning from the NJ Department of the Treasury. Each subsequent year of non-compliance will result in the following penalties:

● 2nd calendar year: $100 per employee
● 3rd and 4th calendar year: $250 per employee
● 5th calendar year and any subsequent calendar year: $500 per employee

 For more information on the state-mandated program and the advantages of adopting a qualified retirement plan instead, please refer to our article from August: RetireReady New Jersey: Ready or Not, Here It Comes! 

Earlier Due Date for 2025 PBGC Comprehensive Premium Filing

(and an implied earlier due date for making 2024 contributions for some plans)

The Pension Benefit Guaranty Corporation (PBGC) is a government agency established by ERISA that covers certain defined benefit plans, including cash balance plans (footnote #1). It provides “insurance” by providing benefits if a plan terminates with insufficient assets to pay the promised benefits and the plan sponsor is financially unable (footnote #2) to contribute the shortfall.

Each year, plans covered by the PBGC must file a form called the “Comprehensive Premium Filing” (CPF) and pay a premium. Generally, the CPF is due on the 15th day of the tenth calendar month that begins on or after the first day of the plan year (footnote #3). For example, the filing due date for a plan with a 2025 calendar plan year would be October 15, 2025.

However, a provision in the Bipartisan Budget Act of 2015 provides that the CPF and premium payment for plan years beginning in 2025 are due one month earlier than usual. Therefore, plans with a 2025 calendar plan year will be required to file the form and pay the premium by September 15, 2025.

The accelerated due dates are applicable only to plan years beginning in 2025. Next year, the deadline reverts to the normal due date.

In some situations, the earlier 2025 CPF filing due date may require that 2024 plan contributions need to be deposited earlier than the usual deadline. If that situation applies to your plan, we will be in touch to provide further details.

Footnotes:

  1. Plans covering only substantial owners, and plans maintained by a professional service employer which have never covered more than 25 active participants are exempt from PGBC coverage. For more information see
    https://www.pbgc.gov/prac/other-guidance/insurance-coverage

  2. https://www.pbgc.gov/prac/terminations/distress-terminations

  3. For certain special situations, a different due date might apply; e.g., new plans, terminating plans, or plans for which the plan year changed.

Combo Plan Design Considerations

A 401(k) plan with a new comparability profit sharing feature is a great way to contribute to retirement savings. But what if you want to contribute more than the legal limit available in a defined contribution plan? A combination of a 401(k) and a cash balance plan can be a potent tax-advantaged savings vehicle. But there are some considerations to be aware of.

If you have a 401(k) plan that uses a safe harbor match, you may want to consider changing it to a safe harbor non-elective contribution. In a combo plan, all NHCEs must generally receive a "gateway minimum" contribution of up to 7.5% of compensation. The safe harbor non-elective contribution counts towards this gateway minimum, but the safe harbor matching contribution does not. Therefore, a sponsor who wishes to minimize the total contribution for NHCEs may prefer the SHNEC.

It simplifies administration for both plans to have the same normal retirement age. In a 401(k) plan, the attainment of normal retirement age as defined in the plan entitles a participant to full vesting and usually to a distribution of their account. For a cash balance plan, however, the choice of normal retirement age can affect the amount that may be accrued in the plan and is therefore vital to the overall plan design. If the definition of normal retirement age in the 401(k) plan does not match with the normal retirement age desired in the cash balance plan, the 401(k) plan should be changed. Note that if the change would result in a later normal retirement date for any participants, any rights to vesting or distributions must be preserved.

Under the SECURE 2.0 Act, long-term part-time employees must be allowed to participate in their employer's 401(k) plan. Although they do not need to be covered by the profit sharing or match portions of the plan, some employers may choose to cover them anyway, to simplify plan administration. If your plan covers or excludes certain classes of employees, consider whether those exclusions should or shouldn't apply to the cash balance plan as well.

These are only some of the many considerations that should be taken into account when adopting a new cash balance plan. For more information, contact your plan consultant. Or come hear our own Corey Zeller, MSEA, CPC, speak about this topic at the ASPPA Annual Conference in Orlando, FL on Sunday, October 20!