Washington Saves Is Coming: What to Consider Before Opting Into the State Plan

Beginning July 1, 2027, Washington employers that do not offer a qualified retirement plan may need to facilitate employee participation in Washington Saves, the state’s new payroll deduction retirement savings program. Washington isn’t just mandating a plan; it’s forcing companies to make a strategic decision about how they want to compete as an employer.

The program is designed to expand access to retirement savings for workers, but it also creates a new compliance decision point for employers: participate in the state program or consider offering an employer-sponsored retirement plan instead.

What Is Washington Saves?

Washington Saves is a state-facilitated auto-IRA program for workers whose employers do not offer a qualifying retirement plan. Employers will be required to facilitate enrollment, payroll deductions, and remit contributions. Eligible employees will be automatically enrolled unless the employee chooses to opt out.

Employees can expect a minimum contribution rate between 3% and 7% in the first year. The board may increase that rate by no more than 1% per year until the maximum default contribution rate of 10% is reached. Employees will generally be able to change their rate to any percentage above the minimum rate required or stop participating.

Which Employers Must Participate?

Employers will be required to participate in the Washington Saves program if they:

• Have operated in Washington state for at least two years;
• Maintain a physical presence in Washington state;
• Do not currently offer a qualified retirement plan; and
• Employ workers for a combined minimum of 10,400 hours annually (roughly five full-time employees).

Why Some Employers May Prefer a 401(k)

For some employers, Washington Saves may be the simplest path to compliance because the employer is not required to contribute to the plan, and the program is intended to be easy to administer. However, an employer-sponsored 401(k) can offer broader strategic advantages.

A 401(k) generally allows higher employee contribution limits than an IRA-based program, may permit employer matching or profit-sharing contributions, and can be designed as a more competitive employee benefit for recruiting and retention. In contrast, state auto-IRA programs are usually more limited in contribution levels and plan design, and employers cannot use them to provide matching contributions. For businesses that want a stronger total rewards package, a 401(k) can be a more flexible and more valuable long-term benefit.

There may also be meaningful tax incentives for eligible small employers that establish a new retirement plan. Under the enhanced federal credits available after SECURE 2.0, many employers with 100 or fewer employees may qualify for start-up cost credits for the first three years, and some may also qualify for credits tied to employer contributions.

Those incentives can help offset the cost of implementing a 401(k) plan and may make a private plan more affordable than many employers expect. For employers already thinking about talent retention, succession planning, or improving benefits, the economics of starting a plan may be more favorable now than in prior years.

What Employers Should Do Now

With the July 2027 effective date approaching, employers should begin evaluating whether they are likely to fall within the program’s coverage rules and whether a qualified employer-sponsored plan may better align with their business goals.

For some businesses, participating in Washington Saves will be an appropriate compliance solution. For others, establishing a 401(k), SIMPLE IRA, SEP, or other qualified plan may provide greater flexibility and a stronger employee benefit.

Reviewing these options early can help employers avoid last-minute implementation pressure and make a more strategic decision for both the business and its workforce. Connect with our team to learn more about Washington Saves.