State-facilitated Workplace Retirement Programs: What Businesses Should Know

Activity on addressing the retirement savings crisis in America continues , for the most part, at the state level. More than half of the states have proposed retirement savings legislation that would require certain-sized private-sector businesses to participate in a state-facilitated IRA program if they don’t currently offer an employee retirement plan. Businesses that don’t comply could potentially incur penalties. Employers can choose a retirement plan from a non-government provider as long as it meets state requirements.

The Federal Reserve reports that financial well-being declined and 35% of those surveyed said they were worse off than the year before, while only 31% of non-retirees from the 2023 survey thought their retirement plan was on track — down 9% from the year before¹.

To deal with this crisis, 20-plus states and two cities have enacted legislation and 12 have fully implemented programs. Of the enacted states, almost all are mandatory except for Massachusetts and Washington, although the Evergreen State is developing a mandatory plan set to launch in 2027. Minnesota, Missouri, Nevada, and Vermont are scheduled to launch their programs in 2025.

Other states that have enacted legislation but as yet have not launched: Hawai'i, New Mexico (postponed), New York (postponed), and Rhode Island.

Fully implemented and active: California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts (for non-profits), New Jersey, Oregon, Virginia, and Washington (voluntary).

Check the status of your state at our online retirement hub.

State Retirement Programs, at a Glance

If your business already offers a workplace retirement plan, you may register for an exemption from the state retirement program. If you have a business without a retirement plan, however, you might need to comply with the state’s (and/or the state where your employees work) program requirements or risk potential penalties. While every state is different, most state-sponsored retirement programs:

• Are designed as Roth individual retirement accounts (IRAs)
• May be mandated for businesses employing a certain number of employees
• Use investment firms and investments chosen by the state
• May require employers to automatically enroll employees at a contribution of 3 to 5 percent of each employee’s payroll wages. Note: An auto-enrollment provision under SECURE Act 2.0 is set to take effect Jan. 1, 2025 and could impact businesses.
• Allow workers to opt out of contributing via payroll deduction
• May require employers to do some administration

Also noteworthy is that a business located in a state without a mandate to offer a workplace retirement plan might still have obligations regarding a workplace retirement program if they have employees working and reporting income in a state that has such a mandate. For example, Wisconsin does not have a state retirement savings program mandate, but the state of Illinois does have a mandate. A business located in Wisconsin that also has the requisite number of employees working and reporting income in Illinois would be required to register for the Illinois Secure Choice Savings program for those employees or offer a private retirement plan for them that satisfies the mandate. If it is the latter, the employer would have to file for an exemption with the state of Illinois and demonstrate proof of their private retirement plan.

Another thing to consider is that unlike 401(k) plans, state-facilitated IRAs are not eligible for up to $16,500 in SECURE Act tax credits.² Their contribution limits are not as high as 401(k)s. Many state programs also require the employer to do their own plan administration — filing, reporting, adjusting contributions limits, and more. This can be burdensome to smaller businesses that don’t have the time or staff to do complex plan management.

Update on the States

Here is a brief update on the enacted state-facilitated retirement programs as of June 2023.

California

The CalSavers program offers a traditional IRA in addition to a Roth IRA, and has oversight from a public board of directors. Recent legislation expands the program to almost all employers with at least one employee (sole proprietors are excluded). Employers must register for the program by Dec. 31, 2025 or offer a private plan that meets the state mandate. CalSavers has begun to notify businesses about penalties for noncompliant employers.

Colorado

The Colorado Secure Savings Program requires businesses with five or more employees to offer a workplace retirement program. The state implemented its program and employers can begin registering.

Connecticut

Connecticut launched the MyCTSavings retirement savings program in early 2022. Businesses with 5 or more employees are required to participate in a state-facilitated IRA program or provide a plan that satisfies the mandate. Noncompliant employers may be subject to civil action and court fees if they fail to enroll an employee in a timely fashion.

Delaware

The state launched its Delaware EARNS (Expanding Access for Retirement and Necessary Savings) program on July 1, 2024. This is a mandatory state-facilitated retirement savings program (Roth IRA). Businesses with five (5) or more eligible employees that have been in operation for at least six months in the previous year must register for the state program if they already do not have an auto-IRA plan for all employees or sponsor a qualified retirement savings plan. This includes cannabis-related businesses in the state. The entity that pays the state unemployment insurance (employer or PEO) is responsible for program compliance. There is an employee opt-out option. Any business failing to comply will face a penalty of $250 per employee per year, up to a maximum of $5,000 per year.

Hawaii

The state has created the Hawaii Retirement Savings Program, a mandatory state-facilitated Roth IRA program that every business in operation for at least two years with at least one (1) employee must participate in, if they have not offered or maintained a qualified retirement plan for some or all employees at any time within the past two years. The state has not set a launch date yet but certain parameters do exist, including an employer requirement to notify employees of the opt-in and the employee's option to opt out.

There will be penalties for failure to provide written notification to employees of the opt-in, as well as financial stakes that include making up missed contribution amounts in the amount each covered employee would have contributed (plus 6% interest rate). In addition, there will be a penalty of $25 for each month the covered employee was not enrolled in the program and $50 for each month they continue to be not enrolled after the date the original penalty is assessed.

Illinois

The Illinois Secure Choice Retirement Program is a mandatory state-facilitated auto-enroll Roth IRA savings program. There is an employee opt-out available with an optional employer re-enrollment. Employers that do not comply may face penalties of $250 per employee for the first year for failure to enroll, and $500 per employee for each subsequent year.

Maine

Launched Jan. 17, 2024, employers with 5 or more employees who have been in operation during the current and prior calendar year and have not offered a qualified retirement savings plan to some or all of its covered employees in the preceding two years will be required to participate in the Maine Retirement Investment Trust (MERIT). Individual contractors and the self-employed are expected to participate.

Maryland

The MarylandSaves program requires businesses of all sizes to offer employees automatic enrollment in a payroll-deduction IRA. The MarylandSaves program launched in September 2022.

Massachusetts

Massachusetts legislation differs from other states in that it applies only to the non-profit sector. The Massachusetts CORE Plan is voluntary and allows non-profit organizations with 20 or fewer employees to participate in the 401(k) multiple employer plan (MEP) administered by the state. Participants must have payroll administered by an eligible third party.

Minnesota

The Secure Choice Retirement Program, which has a scheduled launch date of late December 2025 or first quarter of January 2026, is mandatory for employers (for-profit and non-profit) with five (5) or more eligible employees. The business must have been in operation for at least 12 months and cannot have offered a qualified retirement plan in the previous 12 months. The plan features auto-enrollment and an employee opt-out option for employees 18 years of age or older who receive wages subject to state income tax. Home and community-based services employees may participate, as well.

Missouri

The Show-Me MyRetirement Savings Plan is a voluntary Open MEP for businesses with 50 or fewer employees. It is scheduled to launch Sept. 1, 2025, and employers (for-profit and non-profit) that have not had a plan within the past two years would be eligible to participate. Employees 18 years of age and older receiving wages in Missouri would be eligible and be automatically enrolled. There is the ability for employees to opt out, as well.

Nevada

The Employee Savings Trust Program is mandatory for employers with more than five (5) employees. Its launch date is scheduled for July 1, 2025. Participants (for-profit or non-profit) must be operational for at least 36 months and cannot have offered a qualified plan within current or previous three calendar years.

There will be four registration deadlines for employers based on employee size, starting with 1,000 employees (July 1, 2025) and moving to 500 to 999 (Jan. 1, 2026), 100 to 499 (July 1, 2026), and fewer than 100 (Jan. 1, 2027). Employees must be 18 or older, receive wages subject to Nevada income tax, and have worked at least 120 days for the employer. They will be auto-enrolled but there is an opt-out option.

New Jersey

The New Jersey Secure Choice Savings Program Act has created RetireReady NJ that requires employers with 25 or more eligible employees that have been in business for at least two years to offer a retirement plan (Roth IRA, with a traditional IRA as an alternative election). Smaller or newer employers can join voluntarily. The program launches June 30, 2024, and employees 18 years of age or older who live or work in NJ and receives wages subject to NJ Gross Income Tax may participate.

New Mexico

New Mexico postponed the launch of its voluntary state-facilitated retirement plan options: NM Work & Save IRA and NM Retirement Plan Marketplace. The program will have auto-enrollment and give employees the choice of opting out. All employers whose primary place of business is located in New Mexico may participate. Eligible employees include those 18 and older who receive wages in New Mexico.

New York

The New York State Secure Choice Savings Program was originally voluntary, but legislation has been passed to mandate participation in the program for businesses with 10 or more employees. The launch has been postponed. Eligible employers had to have been in business for at least two years and without a qualified retirement plan for the two years prior.

Oregon

The OregonSaves program has made great strides in helping private-sector workers who don’t have access to workplace retirement plans. Employers are currently required to automatically enroll employees in the IRA savings program if they do not offer their employees a retirement savings plan. The employer penalty for non-compliance is $100 an employee, up to $5,000 a year.

Rhode Island

The Rhode Island Secure Choice Retirement Savings Program is a mandatory state-facilitated Roth IRA that is launching a pilot in the spring of 2025, with full implementation scheduled for the fall of 2025. Businesses with 5 or more eligible employees that has been in operation during the current and prior calendar year, and has not offered a qualified retirement plan must enroll. Deadlines for registration are as follows: Businesses with 101-plus employees must register by 12 months after the program launch date; 50 to 100 employees (24 months after); and 5 to 49 employees (36 months after) follow. The auto-enroll program with an employee opt-out option is for those 18 years of age or older who have been employed for at least 120 days and receive wages in Rhode Island. A $250 fine per employee will be levied for failure to enroll participants.

Vermont

The state launched the VT Saves program on Dec. 1, 2024. This program will be mandatory for businesses with 5 or more employees that have been in operation during the current and prior calendar year, and have not offered a specified tax-favored retirement plan within the preceding two years. Registration deadline for all covered businesses is Feb. 28, 2025.

Employees must be 18 or older, work at least 500 hours for their employer in a calendar year, and receive wages in Vermont to be eligible. They will be auto-enrolled but can opt-out of the plan that has a default contribution rate of 5% per payroll period and an annual auto-escalation from 1% up to 8% maximum.

Employers face noncompliance penalties, including $10 per employee prior to Oct. 1, 2025; $20 per employee between Oct. 1, 2025 and Sept. 30, 2026, and then $75 per employee after Oct. 1, 2026.

Virginia

RetirePath Virginia launched in July 2023 and requires employers with 25 or more employees to participate if they have been in business at least two years and don’t offer an employee retirement plan. The goal is to offer nearly 800,000 private-sector employees a chance to start saving for retirement.

Washington State

In March 2024, the governor signed into law the Washington Saves retirement program for private-sector employees 18 years or older. By July 1, 2027, all private employers who have been in operation for at least two years in the state and have a workforce that has combined for at least 10,400 hours the previous calendar year must participate in the auto-IRA program unless they offer an alternative plan that satisfies the mandate.

The state currently has a marketplace that offers SIMPLE, Roth, traditional IRAs, and 401(k) plans to help the nearly 131,000 Washington state businesses that employ roughly 2 million employees access to a retirement plan.

Regardless of Your State, You Do Have Choices

Some of the state retirement savings programs may be “mandatory”, but employers have the option to adopt a qualified retirement plan that exempts them from participating in the state program. In some cases, a state-run IRA may not be the best fit for your business. For example, you may prefer a traditional 401(k) plan that has higher contribution limits for employees. Or you may prefer a plan that requires less time, staff, and cost to manage, like the Pooled Employer Plan (PEP). It all depends on your business needs and the savings goals of your employees. When in doubt—be sure to compare your options. Start a 401(k) retirement plan that meets your state’s requirements or get help managing a state-run IRA. Either way, Paychex can help you select and manage the right plan for your business and employees.

¹Federal Reserve, Report on Economic Well-Being in U.S. Households in 2022, May 2023

²Setting Every Community Up for Retirement Enhancement. Under the SECURE Act, eligible new plans can potentially get up to $5,000 per year for three years in new plan tax credits with an additional $500 per year with auto-enrollment.