As a means of addressing the retirement savings gap in the country, states have begun requiring certain private employers that do not offer a retirement savings plan to their employees to do so. Generally, businesses can comply with these laws by enrolling their employees into a state-sponsored retirement program or by sponsoring a plan of their own through the private market.
State-sponsored retirement plans are commonly Roth individual retirement accounts (IRAs), designed for low to moderate income wage earners working for small and midsize businesses. IRA means an individual retirement account or individual retirement annuity under 26 U.S.C. §§ 408(a), 408(b), or 408A. The programs are overseen and administered by the state, with investments managed by approved private companies.
Businesses that already offer a workplace retirement plan to their employees may register for an exemption from the state-sponsored retirement program.
Most state-facilitated retirement plans are designed to be covered under the 1975 U.S. Department of Labor (DOL) safe harbor rule and are not intended to create an employer-sponsored retirement plan subject to the Employee Retirement Income Security Act (ERISA). On November 18, 2015, the DOL issued a final interpretive bulletin on state savings programs covered by ERISA. The bulletin explains the conditions under which payroll deduction IRAs would be exempt under ERISA and also outlines the state-facilitated retirement savings programs that would include ERISA-covered retirement plans such as marketplace, prototype plans, and state-facilitated multiple employer plans (MEPs).
Retirement Savings Program Models
Currently, 20 states and two cities have enacted retirement savings programs for private sector workers. The programs have adopted one or a combination of the following three models:
Payroll deduction auto-IRA (employer participation is required if no qualified retirement plan is already offered)
MEP (voluntary)
Marketplace (voluntary)
While each program is different, the most popular type of program that states are enacting automatically enrolls employees in moderate-risk, low-cost retirement savings accounts, referred to as auto-IRAs. Typically, these programs require private sector employers that do not offer a qualified retirement plan to provide their employees with access to retirement savings accounts through payroll deductions.
Individual Retirement Account (Auto-IRA)
State-sponsored retirement plans are typically Roth IRAs. With this type of savings, employee contributions are deducted from after-tax income, which means withdrawals are generally tax free.
State-administered payroll deduction auto-IRA programs share many features. A state board oversees each program and makes program decisions, such as contracting with an IRA provider. Some programs are mandatory for employers to adopt, while others are voluntary. Typically, eligible employees of participating employers are automatically enrolled in a state program but can opt out or change their contribution amount.
The following states and cities have adopted the payroll deduction auto-IRA model:
California
CalSavers is active, and participation is mandatory for certain employers. For program requirements and details, see CalSavers Retirement Savings Program.
Colorado
The Colorado SecureSavings Program is active, and participation for certain employers is mandatory. Employers will receive enrollment communications from Colorado SecureSavings when it is time to register or certify exemption from the program. For program requirements and details, see Colorado SecureSavings Program.
Connecticut
The Connecticut Retirement Security Program, MyCTSavings, is active, and participation for certain employers is mandatory. Employers will receive enrollment communications from MyCTSavings when it is time to register or certify exemption from the program. For program requirements and details, see Connecticut Retirement Security Program.
Delaware
The Delaware Expanding Access for Retirement and Necessary Saving (EARNS) program is active, and participation is mandatory for certain employers. Employers will receive enrollment communications from Delaware EARNS when it is time to register or certify exemption from the program. For program requirements and details, see Delaware Expanding Access for Retirement and Necessary Savings Program.
Hawaii
The Hawaii Retirement Savings Act establishes a state-run payroll deduction IRA program for private sector employees who do not have access to employer-sponsored retirement plans. The program is in the development stage facilitated by a nine-member retirement savings board in consultation with the Department of Labor and Industrial Relations and the Department of Budget and Finance. Participation is mandatory for certain employers. A unique feature of the program is that employee participation is not automatic; employees will have to opt in to participate. Program requirements and details will be provided as the board makes them available.
Illinois
Illinois Secure Choice is active, and participation for certain employers is mandatory. For program requirements and details, see Illinois Secure Choice Retirement Savings Program.
Maine
The Maine Retirement Savings Program is active, and participation for certain employers is mandatory. Employers will receive communications from MERITSaves when it is time to register or certify exemption from the program. For program requirements and details, see Maine Retirement Investment Trust Savings Program.
Maryland
MarylandSaves is active, and participation is mandatory for certain employers. Employers will receive enrollment communications from MarylandSaves when it is time to register or certify exemption from the program. For program requirements and details, see Maryland Small Business Retirement Savings Program.
Minnesota
The Minnesota Secure Choice Retirement Program establishes a state-run payroll deduction IRA program for private sector employees who do not have access to employer-sponsored retirement plans. Participation is mandatory for covered employers with five or more eligible employees that do not provide an employer-sponsored retirement program. The program is in the development stage. Details will be provided as the Minnesota Secure Choice Retirement Board makes them available.
Nevada
The Nevada Employee Savings Trust establishes a state-run payroll deduction IRA program for private sector employees who do not have access to employer-sponsored retirement plans. Participation is mandatory for covered employers that employ six or more individuals and do not provide an employer-sponsored retirement program. The program is in the development stage. Details will be provided as the Nevada Employee Savings Trust Board makes them available.
New Jersey
The New Jersey Secure Choice Savings Program is active beginning on June 30, 2024, and is mandatory for certain employers. Employers will receive communication from RetireReady NJ when it is time to register for or certify exemption from the program. For program requirements and details, see New Jersey Secure Choice Retirement Savings Program.
New York
The New York Secure Choice Savings Plan is in the development stage, and the implementation timeline is unclear. Program requirements and details will be provided as the New York Secure Choice Savings Board makes them available.
New York City
The Retirement Security for All Act (Int. Nos. 888-A and 901-A) creates a city-run, payroll deduction auto-IRA savings program. The law became effective August 9, 2021; however, the program will not be implemented due to the passage of New York State Secure Choice Savings Plan. The New York City act provides for its termination if the state establishes a retirement savings program covering employers that would otherwise be covered by the act.
Oregon
OregonSaves is active, and participation for certain employers is mandatory. For program requirements and details, see Oregon Retirement Savings Program.
Rhode Island
The Rhode Island Secure Choice Retirement Savings Program Act establishes a state-run payroll deduction IRA program for private sector employees who do not have access to employer-sponsored retirement plans. Participation is mandatory for covered employers with five or more eligible employees and that do not provide an employer-sponsored retirement program. Additional information will be provided as the office of the general treasurer makes it available.
Vermont
The Vermont Saves program is active, and participation is mandatory for certain employers. For program requirements and details, see Vermont Retirement Savings Program.
Virginia
RetirePath Virginia is active, and participation is mandatory for certain employers. Employers will receive communication from RetirePath Virginia when it is time to register or certify exemption from the program. For program requirements and details, see RetirePath Virginia Program.
Seattle, Washington
The Seattle Retirement Savings Plan was scheduled to launch in 2021, but the Seattle Retirement Savings Plan Board will not implement the program due to the state establishing a statewide Secure Choice auto-IRA program.
Washington
The Washington Saves program is a state-run, payroll deduction auto-IRA savings program. The law passed on March 28, 2024, but the governing board has until 2025 to begin establishing the program details and an implementation schedule for a launch date by July 1, 2027. Program implementation and requirements will be added as they become available.
Voluntary Payroll Deduction IRA
One state has adopted the voluntary payroll deduction IRA model.
New Mexico
The New Mexico Work and Save Act creates both a state-run, payroll deduction Roth IRA savings program and a web-based retirement plan Marketplace. Participation is voluntary for employers and employees. Participating employers will not have fiduciary responsibility for the payroll-deduction IRA program, but plans offered through the Marketplace will generally be subject to ERISA. Program designs and implementation schedules are unknown. Requirements and details will be provided as the New Mexico Work and Save Board makes them available.
Voluntary Retirement Marketplace
Voluntary retirement marketplaces are online clearinghouses that provide small businesses and individuals the ability to comparison shop for savings plans from financial services providers. Participation is voluntary for employers and employees.
The following two states have adopted the voluntary marketplace model:
New Mexico
In addition to the state-run, payroll deduction Roth IRA savings program shown above, the New Mexico Work and Save Act creates a voluntary web-based retirement plan marketplace. See above for more details.
Washington
The Washington Small Business Retirement Marketplace is active, and participation is voluntary for businesses and individuals, including sole proprietors, gig workers, and the self-employed. For program requirements and details, see Washington Small Business Retirement Marketplace.
Voluntary Open Multiple Employer Plan
Voluntary open MEPs involve aggregating employers who elect to participate to offer a 401(k)-style retirement plan. This method allows businesses to jointly offer plans and is subject to ERISA.
Two states have adopted the voluntary open MEP model.
Massachusetts
The Massachusetts Defined Contribution CORE Plan is active, and participation is voluntary for nonprofit businesses with 20 or fewer employees. For program requirements and details, see Massachusetts Defined Contribution CORE Plan.
Missouri
The Missouri Show-Me MyRetirement Savings Program is a voluntary MEP, effective August 28, 2023, for private Missouri-based businesses with 50 or fewer employees and self-employed individuals. The program is scheduled to be operational by September 1, 2025, and will allow employer-matching contributions.
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