Governor’s Conditional Veto Reforms Small-Business Retirement Plan

Lilo H. Stainton | January 12, 2016 | Politics
Legislature willing to accept changes, despite disappointment, anger of some advocate groups

Assembly Speaker Vincent Prieto (D-Hudson) is one of the lead sponsors of a bill to create retirement accounts for employees at small businesses.
A bipartisan plan to require small businesses to offer a portable retirement savings program administered by the state was rejected by Gov. Chris Christie Monday and sent back to the Legislature with changes. New Jersey lawmakers were prepared to accept those changes amid a flurry of last-minute legislative activity that stretched past midnight, to the dismay of at least one small-business group.

In a conditional veto issued Monday afternoon, Christie lauded the Legislature’s attempts to help Garden State workers save for their senior years. But he said the measure, as drafted, created unnecessary burdens on small businesses and expanded state bureaucracy when private-sector options were available.

According to AARP, which heavily promoted the program that was initially called Secure Choice, some 1.7 million private-sector workers in New Jersey don’t have access to retirement savings plans.

The governor’s changes were in line with recommendations made by some business lobbyists, and Christie said they reflected elements of a successful program underway in Washington State. But several lawmakers and advocacy organizations were less enthusiastic about the revisions to the state’s first effort to help private-sector workers save for retirement.

“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 (D-Hudson) a lead sponsor of the measure, along with Senate President Stephen Sweeney (D-Gloucester), and dozens of their colleagues.

But one organization, the New Jersey Main Street Alliance, which represents 1,500 small-business owners, offered stronger criticism of the changes and accused Christie — a contender for the Republican presidential nomination — of playing up to GOP voters in other states. The alliance declined to support the revised version, claiming the governor “wasted the best chance to help millions of New Jerseyans begin saving for retirement” by issuing the CV.

The Assembly and Senate were slated to approve Christie’s changes before the late-night session came to a close early Tuesday morning, returning the revised measure to the governor to be signed into law. Originally called the New Jersey Secure Choice Savings Program Act, the plan was renamed the New Jersey Small Business Retirement Marketplace.

Doug Johnston, AARP New Jersey State Director, said he was disappointed as well. According to a recent AARP poll, nearly two-thirds of Garden State residents between 35 and 65 are anxious about saving enough money to afford to retire. But for workers whose employers don’t offer retirement savings program, the options can be limited.

In a statement issued before the final vote, Johnston said the original version of the bill was “the most efficient and effective method to help small businesses help their employees.”

“However, today, Gov. Christie signaled that he is willing to talk about solutions to the retirement security crisis in NJ. We look forward to continuing conversations on the topic,” Johnston added.

The governor’s revisions made it optional for small businesses that don’t offer retirement savings on their own to participate. The original language required businesses with more than 25 workers to sign on, or risk fines, and make the plan available to any workers who wanted to contribute; smaller businesses had the option of getting involved.

In addition, Christie’s version calls on a panel of relevant state officials to select several commercial investment plans that private-sector workers can pay into to save for retirement. The initial proposal called for a seven-member panel made up of state officials, employers, and expert volunteers to create a new state-facilitated retirement plan.

It was this change that drew the wrath of the Main Street Alliance. Jerome Montes, their business representative, said in a statement that the “key component” of the original bill was what he termed a public-private partnership designed to make it easier and less costly for small employers to offer retirement savings plans. The governor’s version merely creates a state-run “business portal” for existing commercial retirement plans, he said.

“Small-business owners will still have to find a plan, manage a plan and finance a plan. The expense and complication involved are the main reasons many small-business owners do not offer workplace retirement plans to begin with. This is not a bill we can support,” Montes said.

Contributions to the retirement fund would come from employee’s themselves, through a pre-tax payroll deduction similar to tax withholdings. The measure does not require the state or employers to pay into the fund, but Christie said that the original version of the bill would require the state to cover the upfront cost of creating the program — even if it would be reimbursed eventually.

“I share the sponsors’ concerns for the financial future of the residents of New Jersey, but I believe that the approach taken by the Legislature — mandating participation under threat of fines for not participating — is unnecessarily burdensome on small businesses in New Jersey,” Christie wrote. “The marketplace model appropriately focuses on maximizing participation in available retirement savings options instead of creating a new state-run program to provide duplicative services.”