Earlier this week, Mayor Bill de Blasio signed a bill into law that will require most employers not offering a workplace retirement plan to automatically enroll their workers into an individual retirement account through a city-administered program.
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Studies show that people are 15 times more likely to save for retirement if they can do so through their workplace, CNBC reports.
Several other states have launched auto-IRA initiatives in an effort to help people save. In California, Illinois and Oregon, employers that do not offer programs like 401(k)s for their employees but have more than a certain number of employees must enroll with the state auto-enroll IRA program by a deadline or face a fine, according to The New York Times.
The employers of half of private-sector workers in the United States, about 55 million people, do not offer any kind of retirement savings vehicle, the Times reported in 2020.
Often, the hassle of enrolling employees into such programs can run employers off the idea of providing them. Additionally, employer contribution requirements, as with some 401(k)s, can make the plans financially prohibitive.
One of the largest benefits auto-enroll IRA programs offer is that the entire contribution is made by the account holder themselves — there is no matching, and there is no contribution that the employer is responsible for. Unlike with a 401(k), the employee pays any fees associated with an IRA. The onus is on the employer to enroll their employee, but from there, it’s essentially hands off.
Large employers are more likely to offer retirement options like 401(k)s, as they have the means to cover administrative work, fees and matching provisions that small businesses may find burdensome. These auto-enrollment plans can serve as a way for employees of small businesses to access some of the same retirement benefits employees of large companies have access to.
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This article originally appeared on GOBankingRates.com: New York City to Require Some Businesses to Auto-Enroll Workers in IRAs