To bridge the retirement gap, several states have enacted state-mandated retirement savings programs by either requiring businesses to provide an employer-sponsored qualified retirement plan or enroll their employees in a state-sponsored retirement program.  Businesses that fail to comply will face penalties.  Requirements and penalties vary by the state.  Below is a list of states with upcoming or recently passed deadlines:

Virginia RetirePath

All businesses eligible in 2023 must register by February 15, 2024. Per eligible employee penalty is $200.

Maine MERIT

Businesses with 5 or more employees must register by April 30, 2024. Per eligible employee penalty is unknown.

New Jersey RetireReady NJ

All businesses with 25 or more employees and have been in business for two or more years must begin offering in Summer of 2024. Failure to comply with program guidelines within 12 months of implementation will result in fines of up to $500 per eligible employee.

California CalSavers

Businesses with 1-4 employees must register by December 31, 2025. For all other eligible businesses, deadlines have passed. Per eligible employee penalty is between $250 – $500.

Colorado

All deadlines have passed. Per eligible employee penalty is $100.

Oregon

All deadlines have passed. Per eligible employee penalty is $100.

Illinois

All deadlines have passed.  Per eligible employee penalty is $250 for the first year and $500 for each subsequent year.

Employers have two options – provide an employer-sponsor qualified retirement plan or enroll employees in the state-sponsored program.  While sponsoring your own retirement plan may seem like the more cumbersome option, take into consideration the following pitfalls of state-sponsored programs:

  • Significantly lower contributions limits
  • Cannot incorporate profit sharing
  • Generally only Roth accounts are available (no Pre-Tax option)
  • Standard plan design
  • Forego the potential for greater tax deductions
  • Loans are not permitted

Contact us to see how you can design a cost-effective qualified retirement plan for your small business before implementing an inadequate state-sponsored program.