State-mandated retirement plans are continuing to gain traction throughout the United States. As of June 2022, several states enacted legislation requiring certain employers to enroll their employees automatically into the state-sponsored retirement plan. At the same time, other states have created an optional retirement plan exchange system. The rules of these programs vary from state to state but were crafted to decrease the retirement gap for the millions of U.S. workers who currently don’t have access to an employer-sponsored plan.
States with Mandated Plans as of June 2022
California’s CalSavers Retirement Savings Program began in July of 2019. It offers a Roth Individual Retirement Arrangement (IRA) to eligible employees in California who do not have access to a tax-qualified retirement plan through work. Employers that do not already offer a retirement plan and have more than five employees are required to participate in the CalSavers. Employers who already provide a retirement program may go online to opt out.
The deadline for covered employers to register with CalSavers was staggered based on employer size. The registration deadlines for many employers have passed, but employers with at least five employees have until June 30, 2022, to register.
Connecticut’s MyCTSavings program launched in April 2022 and offers a Roth IRA. Employers who meet ALL of the following criteria must register for the program:
- A for-profit and not-for-profit employer who does not currently offer a retirement savings plan
- Employed five or more employees in Connecticut on October 1 of the previous year
- Paid at least five employees $5,000
Employers who already offer an eligible plan should file for an exemption.
While employers must automatically enroll employees in the program, participation is voluntary. Participants may opt out at any time, but they also have the option to re-enroll at a later date. Participants can find more details online.
Beginning in 2018, Illinois implemented the Illinois Secure Choice Retirement Savings Program (Secure Choice). This program offers a Roth Individual Retirement Arrangement (IRA) to employees in Illinois who do not have access to a tax-qualified retirement program through work. Employers who do not offer an employer-sponsored retirement plan, have more than five employees, and have been in business for more than two years must participate in the Illinois Secure Choice Retirement Savings Program.
The deadlines for employers to register with Secure Choice are staggered based on employer size, as described below:
- The enrollment deadline for employers with 16-24 employees will be no sooner than November 1, 2022.
- The enrollment deadline for employers with 5-15 employees will be no sooner than November 1, 2023.
Employee participation is voluntary. Employees may visit the IL Secure Choice website for information about managing or opting out of an account.
Oregon launched the OregonSaves program in October 2017. The program offers a Roth IRA to eligible employees in Oregon who do not have access to a tax-qualified retirement plan through work. All Oregon employers who do not offer a retirement plan for their employees and employ more than five employees should already be registered to participate in OregonSaves. Registration deadlines were staggered based on employment size. The only group left to register are employers with four or fewer employees. Registration for those employers is targeted for early 2023. Companies can file for an exemption online. (https://oregonsaves.vestwell.com/exempt)
Employees can opt out of the program and a secure online portal allows them to manage their account.
States Offering Retirement Plan Options (non-mandated)
Massachusetts and Washington state both offer employers retirement plan options, but they do not require employers to participate. In Massachusetts, nonprofit organizations with twenty employees or fewer may be eligible to adopt the Massachusetts Defined Contribution CORE Plan. Washington allows all employers and employees open access to the Retirement Marketplace.
More and more states are considering legislation that creates mandated retirement programs. Seven additional states (Colorado, Maine, Maryland, New Jersey, New Mexico, Virginia, and Vermont) have passed legislation. Maryland is scheduled to begin piloting its program in June 2022. Colorado anticipates beginning enrollments in October 2023, and New Mexico has set an implementation deadline of June 2024. The other states have not yet announced program timelines.
Do you have questions concerning how state mandate plans will affect your business, or are you looking for a better way to manage employee benefits withholdings? Connect with a CBIZ Human Capital Management Solutions Specialist who can help!
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as professional advice. Information within this article updated on June 14, 2022.