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PensionsMay 20, 2021

NY State Assembly Passes Mandatory Auto-IRA Bill

The amended ‘Secure Choice’ program would apply to companies with 10 or more employees.

The New York State Assembly has passed a bill that would create a mandatory automatic individual retirement account (IRA) program for private sector companies with 10 or more employees that do not offer a retirement plan.

The bill would amend the state’s voluntary “Secure Choice” auto-IRA program to make it mandatory, along with other adjustments. The proposed legislation would also create a board that will be responsible for the general administration and operation of the program. The bill now heads to the New York State Senate.

The board would also evaluate and establish, or authorize, the process for enrollment, including the process by which an employee may opt out of the program, choose a contribution level and an investment option, and exit the program.

Participating employers would be required to provide payroll deduction retirement savings arrangements for employees and deposit funds into the program on their behalf. Employers would also be required to automatically enroll in the program each of their workers who has not opted out of the program; however, they would not be liable for an employee’s decision to opt out of the program.

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The bill defines an employer as a person or entity that has at all times during the previous calendar year employed at least 10 workers in the state, has been in business at least two years, and has not offered a qualified retirement plan in the previous two years.

A memo included in the legislation cited a Boston College report that said nearly 53% of US households are at risk of not saving enough for their retirement. The memo also cited an Aon Hewitt study that found that employers with auto-enrollment have savings plan participation rates of approximately 83%, which is 18 percentage points higher than in companies without auto-enrollment. Additionally, it said studies have shown those who are more likely to not participate in a retirement plan—such as young people, low-income workers, and minorities—increase their participation under auto-enrollment programs.

“This bill could help millions of private-sector employees in New York state save for their retirement, making themselves financially independent,” Beth Finkel, state director for AARP New York, said in a statement. “Many small businesses recognize a workplace retirement savings plan as a benefit to attract and retain employees—but many can’t afford it. Secure Choice would solve that problem.”

Earlier this month, the New York City Council passed a bill that would also create a mandatory IRA program for employees of private-sector employers that do not offer a retirement plan and have five or more employees. The council also passed another bill that would establish a board to oversee the retirement savings program.

PE Fund CEO Charged With Lying to Secure $95 Million Loan

Elliot Smerling could face more than 60 years in prison for wire fraud, bank fraud, and identity theft.

By Michael Katz

The CEO of a private equity fund has been indicted on wire fraud, bank fraud, and identity theft charges for allegedly using a forged audit letter, as well as fake subscription agreements and bank statements, to obtain a $95 million subscription-backed line of credit.

According to an indictment unsealed in the US District Court for the Southern District of New York, Elliot Smerling “willfully and knowingly executed a scheme and artifice to defraud a financial institution.” The indictment said he solicited and obtained the loan from an unnamed California-based commercial bank on behalf of the general partner of his private equity fund. The loan was allegedly secured by purported capital commitments made by the limited partnership of investors in the fund.

Late last year, Smerling allegedly contacted an employee of the commercial bank about acquiring an approximately $95 million loan for his private equity fund. The employee referred Smerling to a director in the bank’s global fund banking group, who requested materials from Smerling concerning the private equity fund and its general partner to evaluate the loan request. Smerling, according to the indictment, sent the director materially false documents that the bank used in deciding to approve the loan.

The allegedly falsified documents and material misrepresentations included a forged audit letter—purportedly prepared by an international network of accounting, audit, tax, and professional services firms—and forged subscription agreements that falsely represented that the investment fund of a private New York City university and its CIO had committed $45 million to the fund. Smerling also allegedly represented that the investment management division of a New York banking and financial services firm and its CEO committed $40 million to the fund.

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“As alleged, Elliot Smerling went to elaborate measures to create a blatantly false picture of the financial underpinnings of a private equity fund in order to obtain a $95 million line of credit,” Audrey Strauss, US Attorney for the Southern District of New York, said in a statement. “Smerling allegedly induced a California bank to make a loan commitment it never would have made had it known the truth.”

Smerling, 52, of Lake Worth, Florida, faces a maximum sentence of 30 years in prison and a maximum fine of $1 million or twice the gross gain or loss for each of the counts of wire fraud and bank fraud. Aggravated identity theft carries a mandatory sentence of two years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.