State Law to Require Businesses with 25-Plus Employees to Offer a Workplace Retirement Program, RetirePath Virginia
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Last Updated: 07/16/2021
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With only 44 percent of employees in the private sector lacking access to a workplace retirement program in Virginia, according to the American Association of Retired Persons (AARP)1, the state legislature took action to help improve the coverage gap. The signing of HB 2174 into law by Gov. Ralph Northam in April 2021 established VirginiaSAVES, recently renamed RetirePath Virginia, that would give many of these individuals an opportunity to participate
Oregon, California and Illinois have implemented programs, while others are at various stages of rolling out similar programs.
Details on Virginia’s state-mandated retirement program
The United States has a growing retirement problem that must be addressed, with a report showing households with individuals nearing retirement having a median retirement account balance of $14,5002. Nearly 800,000 employees could benefit from participation in VirginiaSAVES, according to AARP.
Although some details of the plan are still being worked out, it is expected that the program will be rolled out in phases similar to how other states with mandated programs have approached implementation, including a pilot in March 2023. This means larger businesses could be required to register first. Enrollment is scheduled to begin no later than July 1, 2023 for eligible employers, but an exact timetable has not been set.
Administration and development of the program lies with the Virginia College Savings Plan board, which also runs the state’s 529 program.
What Employers Should Know About RetirePath Virginia
Participation is mandatory for businesses who:
- Have been in operation for at least two years
- Had 25 or more employees in the previous calendar year
- Do not already offer a qualified retirement plan to employees
A qualified retirement plan includes a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b).
The law also stipulates that employers eligible to participate includes self-employed individuals, sole proprietors, non-governmental businesses or other enterprises, whether for-profit or not-for-profit.
Employers will automatically enroll eligible employees — anyone at least 18 years of age who is employed at least 30 hours per week and receives wages in Virginia — but employees can opt out. Part-time employees (those who work fewer than 30 hours a week) are not eligible after the Virginia Senate defeated an amendment by Gov. Northam to include part-timers in the program.
There is a default contribution amount of 5% per pay period with an annual auto-escalation of 1%, up to a maximum of 10%.
Employers cannot contribute to the program such as matching funds.
What are Compliance Obligations for Employers Under RetirePath Virginia?
Similar to some of the currently active state-mandated programs, employer involvement is minimal with RetirePath Virginia, but there are certain requirements necessary to stay compliant. Businesses must:
- Register by the deadline (when provided) or offer a qualified option that satisfies the mandate
- Set up payroll deduction for employees (the percentage of wages allocated per pay period has yet to be determined)
- Hold an annual open enrollment period
- There is a penalty of $200 per employee annually for non-compliance
While the Virginia College Savings Plan board develops policies to implement and run the RetirePath Virginia program, eligible businesses should begin looking at what best fits the needs of their employees. They should also stay up-to-date on state retirement plans to stay current with relevant changes. Additionally, businesses don’t have to wait for RetirePath Virginia registration deadlines to be announced. Instead, consider establishing a retirement plan such as a 401(k) or even a Pooled Employer Plan through a provider such as Paychex to satisfy the mandate.
1Feasibility Study of Retirement Savings Programs for Virginia (HJR 103), 2018
2National Institute of Retirement Savings, “The Continuing Retirement Savings Crisis”