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Explanation of State Retirement Mandates
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State Mandated Retirement Programs — Are You Ready?

State retirement mandates are a growing trend. Your business may soon be required to offer an employee retirement savings option. Should you participate in a state-run IRA or offer a 401(k) plan with benefits such as a potential $16,500 small business tax credit1? See what your state is doing, then compare your options.

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What’s Happening in Your State?

Every state is different. Some have retirement laws already in place, while others have legislation pending. Click on your state to see what’s required.

State IRA or 401(k) Plan — Which is Better for Your Business?

When employees participate in a retirement plan at work, they are 15 times more likely to save for retirement2. That said, not all retirement plans are created equal. A 401(k) plan from a private provider may be a better way to save for both you and your employees.

Compare Your Options

State - IRA

Paychex 401(k) Plan

Paychex Retirement Services

Contribution Max

Based on 2022 IRS Contribution Limits

$6,000

$20,500

Company Match Option

No

Yes, at employer's discretion

Tax Credits for Opening a New Plan

No

Opportunity for up to $5,500 per year, for the first 3 years1

Employer Tasks

Employer processes payroll contributions, updates contribution rates, adds newly eligible, etc.

Paychex makes administration simpler as your recordkeeper

Paychex 401(k): A More Powerful Option

A state-facilitated IRA has lower contribution limits, more administration, and is not eligible for SECURE Act small business tax credits. By contrast, a Paychex 401(k) plan:

  • Fulfills the state retirement mandate
  • Includes help with plan set up and administration
  • Has more than three times the annual contribution limit of an IRA, so employees can save more, faster
  • Offers savings opportunities, including potential tax credits
  • Integrates with Paychex payroll—one platform, one provider
  • Provides the support and experience of the nation’s largest 401(k) plan provider3
employees happy with their 401k plan

How a California Plumbing Business Made Retirement a Fixture

With the state of California requiring most employers to offer an employee retirement option, Plumbing M.D. embraced the opportunity and turned to Paychex. The business saw some surprising results: 100 percent participation in their Paychex 401(k) plan, and employees under the age of 30 who are enthusiastic about the plan.

Plumbing MD
Plumbing M.D.
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Reduce Your Business Taxes with SECURE Act Tax Credits

The SECURE Act of 2019 offers small businesses the ability to establish a retirement plan and potentially lower their tax liability. Your business may take advantage of retirement plan tax credits of up to $5,500 per year, which includes a $500 credit for implementing automatic enrollment in the plan, for three years, if you meet eligibility requirements. These startup tax credits go toward the costs of starting a new 401(k) plan as well as educating employees about the plan. Only new plans are eligible for these tax credits.

business owner working on taxes

The Simpler Way to 401(k)

Offering a 401(k) plan to your employees doesn’t have to be complicated. As the provider for the largest number of 401(k) plans in the country3, Paychex has 401(k) administration down to a science. Our integrated payroll and benefits solution streamlines plan management and controls costs. With online enrollment, cloud-based account access, and support from retirement specialists, you and your employees can start saving today.

Retirement Insights

Employee Benefits

FAQ on State-Sponsored IRAs

Recognized by Industry Experts for Our Innovation, Ethics, and Service

Largest 401(k) recordkeeper by number of plans 2022
Largest Recordkeeper by Number of Plans

PLANSPONSOR magazine recognizes Paychex as largest 401(k) Recordkeeper by number of plans for twelfth consecutive year

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Paychex was honored by the Ethisphere Institute as one of the World’s Most Ethical Companies for 2022. Being an 14-year honoree underscores Paychex’s commitment to ethical business standards and practices, ensuring long-term value to key stakeholders including customers, investors, and employees.

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State Retirement Plan FAQs

  • What is a state-mandated retirement program?

    What is a state-mandated retirement program?

    Many states are requiring businesses to participate in a state retirement savings program if they don’t currently offer an employee retirement plan. Businesses that don’t comply could potentially incur state penalties. However, this varies depending on the business size and the state.

  • Why are states requiring employers to offer workplace retirement plans?

    Why are states requiring employers to offer workplace retirement plans?

    Across America, many states are experiencing a retirement savings crisis. The Federal Reserve reports that roughly a quarter of non-retired adults have no retirement savings. To deal with this crisis, states and some cities have enacted legislation to help employees save for retirement through their employer.

  • What type of retirement savings program is offered by the state?

    What type of retirement savings program is offered by the state?

    Most states offer Roth individual retirement accounts (IRAs), which:

    • May require employers to automatically enroll employees at a contribution of three to five percent of payroll wages
    • Allow workers to opt out of contributing via payroll deduction
    • May require employers to do some administration
    • Have their investments chosen by the state
  • Does my business have to participate in a state-sponsored retirement savings program?

    Does my business have to participate in a state-sponsored retirement savings program?

    No. Employers have the option to sponsor a retirement plan from a non-government, private-sector provider. For example, they may prefer a privately managed 401(k) plan that meets state requirements.

  • Why should I consider a private-sector 401(k) plan versus a state IRA?

    Why should I consider a private-sector 401(k) plan versus a state IRA?

    A 401(k) plan has substantially higher contribution limits than an IRA, so your employees can save more, faster. You may prefer a plan that requires less time, staff, and cost to manage, like a Pooled Employer 401(k) Plan (PEP). And, new 401(k) plans may be eligible for SECURE Act tax credits1, which are not available with a state-sponsored IRA. 401(k) plans tend to be popular with employees and may give you an edge in recruiting. It all depends on your business needs and the savings goals of your employees.

  • What are the penalties if I don’t comply with state requirements?

    What are the penalties if I don’t comply with state requirements?

    Penalties vary by state, but some can be steep. For example, California’s CalSavers program fines $250 per eligible employee after 90 days of noncompliance, and $500 after 180 days. Even if you have a small number of employees, that can add up.

  • What if I already offer an employee retirement plan?

    What if I already offer an employee retirement plan?

    You may register for an exemption from the state. Check with your state to see what the requirements are.

  • How do I stay up to date on my state’s retirement mandate laws?

    How do I stay up to date on my state’s retirement mandate laws?

    Many laws are still in the proposal stage or haven’t been implemented yet. Check back here periodically and click on our map to see the status of mandatory retirement in your state.