New York City Council Passes Bill Mandating IRAs For Small Business Workers
NEW YORK (CBSNewYork) -- About 1.5 million private sector workers in New York City don't have access to retirement plans through their employers.
On Thursday, the City Council passed a bill to change that, CBS2's Alice Gainer reported. All it needs now is the mayor's signature.
"I tell my employees all the time, I say, 'Look, you should try to save your money,'" said Lide Sementilli, general manager at Total Care Pharmacy in the Bronx.
Sementilli's five employees will get some help to do that after the City Council passed a bill mandating IRAs (individual retirement accounts) for small businesses.
"Nearly half of New Yorkers who are retirement age have less than $10,000 saved up," said City Council Member Ben Kallos.
The plan is sponsored by the city for private sector employers that have at least five workers and don't already offer a retirement plan.
Employees will be automatically enrolled with 5% of their wages going into their retirement fund. They can adjust the amount or opt-out. Gig workers are allowed to opt-in.
"There will be no employer matching. No employer liability. All the employer is doing is facilitating the payroll deduction," Kallos said.
Shane Hathaway, who owns Hold Fast in Hell's Kitchen, is excited for his employees and happy about no cost for the business after struggling during the pandemic.
"We've had enough costs as it is," Hathaway said.
Critics say this could mean employers who offer a 401(k) might stop since they don't need to match contributions through the automatic IRA.
AARP's Beth Finkel says too many people depend on Social Security for retirement.
"$20,000 a year is what your average amount is that you get. But anyone who lives in New York City knows that's not going to support your retirement," Finkel said.
Council Member Daneek Miller believes this will particularly help communities of color that have seen average household wealth drop for decades
"Over the next decade, it would almost be at net zero, and so this absolutely has to be done for people to have their quality of life," Miller said.
Mayor Bill de Blasio still has to sign it into law. It would go into effect 90 days later, but the Retirement Security Board would have up to two years to implement it.
AARP says research shows there may be a small fee involved with the plan - less than $500 per year no matter how many employees a business has.
If an employee enrolled in the plan changes jobs, they could continue to contribute or roll it over into another plan. A handful of states already have similar plans in place.