State play-or-pay laws to urge employers to facilitate retirement savings

[Peter Gulia]

If you're following States' legislation on using a play-or-pay tax to push an employer to make available payroll-deduction retirement savings, this link is to a bill pending in New Jersey's legislature.

http://www.njleg.state.nj.us/2014/Bills/A4500/4275_R2.PDF

It would, after a phase-in, impose a $500-per-employee tax on an employer that maintains no retirement plan and does not send payroll-deduction contributions to IRAs.

[jpod]

Isn't this preemption 101? Going down the road of taxing rather than regulating can't avoid preemption, can it?

[Peter Gulia]

It's uncertain, and there are at least two appeals court decisions with reasoning that points in opposite directions.

Also, it might be more difficult to challenge a tax as an indirect command to maintain a plan if an employer can meet the condition for non-imposition of the tax by implementing a payroll-deduction convenience that the U.S. Labor department's rule will define as a non-plan.