New Jersey employers finally have a retirement savings plan that is managed for their needs, not the interest of the financial industry.
Through a multi-employer plan, small employers have the same advantages – low fees, cost savings, investment advice, employee education – as large corporations with thousands of employees.
The state, indeed the nation, increasingly faces a retirement savings crisis. Many New Jersey workers don’t have a way to save for retirement through their job.
Over half of New Jersey workers – about 1.7 million workers – have no private retirement account. For those that do, the medium retirement account balance is $3,000 for all working households and $12,000 for near retirement households.
Moreover, women are far more likely than men to face financial hardship in retirement. A report by the National Institute on Retirement Security (NIRS) finds that across all age groups, women have substantially less income in retirement than men.
According to John Sarno, president of the Employers Association of New Jersey, the consequences of growing savings shortfalls not only impacts the quality of life for the state’s residents, it is detrimental to the entire economy, as a large share of households may be forced to significantly reduce consumption in retirement and will have to rely heavily on their families, charities, and the government for help to make ends meet.
To help address this emerging problem, and to help its employer-members sponsor retirement savings plans for their employees, the Employers Association launched a multiple employer plan (MEP).
By adopting a MEP or merging its single-employer plan into a MEP, an employer transfers all or some of the fiduciary role to the plan sponsor, which manages administration functions, investment selections and legal compliance under the supervisor of fiduciary trustees.
“At the end of the day, employers don’t want to solve society’s problem, they want to solve their problem” says Sarno “but collectively we are going a long way to doing both.”
According to Sarno, it has always been the goal to grow the EANJ program with the purpose of driving down the costs for each individual participant. While already considered one of the least expensive retirement plan options in the country - with an advisory fee at .55 basis points for total plan assets up to five million dollars - the EANJ plan is built to reduce fees for participants as it grows.
As more employers enroll, fees decline in stages until a $20 million-dollar threshold is reached. At that stage, advisory fees drop to .40 basis points.
Having now exceeded $5 million dollars, the advisory fees for every participating member have been reduced to .50 basis points, or a ten percent reduction for each participant.
"We are creating great value for small businesses and helping to solve a major social problem. For some of these employers, it's the first time that they can sponsor a plan. Their employees are appreciative. It's a tremendous win-win-win," says Sarno.