New Jersey's RetireReady NJ Program: What Employers Need to Know!
RetireReady NJ is a state-sponsored program primarily aimed at employees who do not have access to a workplace retirement plan (such as a 401k). It’s designed to serve as a basic, accessible option for individuals who might otherwise lack retirement savings.
Under state law, New Jersey employers with 25 or more employees are required to either:
Offer an alternative qualified retirement plan (like a 401k)
OR automatically enroll their eligible employees in the RetireReady NJ program
The mandate applies to businesses that have been operating for at least two years.
If your company already offers a retirement plan that meets federal requirements, you are exempt from enrolling in the RetireReady NJ program. However, if your business falls under the mandate and fails to comply, penalties may be imposed, starting with a written warning in the first year and escalating to fines in subsequent years.
A 401(k) plan is an employer-sponsored retirement plan available to companies of all sizes, allowing both employees and employers to contribute. It is a much more comprehensive tool, offering higher contribution limits and flexibility in investment options.
401(k) Plan Advantages
Larger Contribution Limits
A 401(k) allows business owners and employees to save more, which is crucial for those looking to build substantial retirement funds and save on taxes through tax deductible and tax-deferred contributions. A 401(k) plan allows employees to contribute significantly more to their retirement savings. For 2025, the employee contribution limit for 401(k) plans is $23,000 for individuals under 50 and $30,000 for those over 50. This is a substantial advantage for individuals who want to maximize their retirement savings. In the RetireReady NJ program, the employee contribution limit is significantly less at $6,000 per year for individuals under 50 and $7,000 for those over 50.
Employer Contributions
Employer contributions aren’t permitted in the RetireReady NJ program. The program relies solely on employee contributions through payroll deductions. One of the key benefits of a 401(k) plan is the potential for employer contributions, often in the form of matching and profit sharing contributions. Many employers offer to match employee contributions, sometimes dollar-for-dollar up to a certain percentage, significantly boosting retirement savings. This is a huge advantage for employees looking to maximize their retirement funds. Additional employer contributions in the form of profit sharing
More Investment Options
The RetireReady NJ program offers a set list of investment options, which may not offer the flexibility that more experienced investors may seek. With a 401(k), business owners and employees have greater flexibility to choose their investment options from a wide range of mutual funds, stocks, and bonds. This allows employees to tailor their investments to their specific risk tolerance, goals, and preferences, allowing them to take more control over how their money grows.
Tax Flexibility
Contributions to RetireReady NJ are made on a pre-tax basis, reducing employees' taxable income for the year in which the contribution is made. The investment growth is taxed upon withdrawal. In addition to pre-tax contributions, 401(k) Plans have the option to allow Roth contributions, meaning employees can contribute after-tax dollars with tax-free withdrawals in retirement. The ability to choose between a traditional 401(k) or a Roth 401(k) offers greater flexibility in retirement tax planning.
Fee Considerations
RetireReady NJ has an annual asset-based fee of approximately 0.75% of the account balance, and the investment options within the program may carry their own fees. While this is relatively low, the limited investment options can result in lower overall potential for growth. While 401(k) plans also have fees, they can vary greatly depending on the plan provider, the investment options, and the size of the company. Larger employers often have access to lower-cost funds and may be able to negotiate better fees, which can make a significant difference in the long term.
While RetireReady NJ is an option for employees who don’t have access to a retirement plan at work, 401(k) plans provide much more value in terms of contribution limits, investment options, and long-term financial growth potential. For employees and employers alike, a 401(k) plan remains one of the most robust retirement savings tools available.
Contact Us
SS Pension Consultants LLC is a third party administration and actuarial consulting firm specializing in 401(k) and Cash Balance Plans for business owners. Contact us today to set up a new plan or improve your current one. We offer a simple, flat-rate annual fee of $780 for plans using an approved recordkeeper — without sacrificing quality or service.