Retirepath Virginia: What You Need to Know About State Retirement Mandates

In the state of Virginia, approximately 45% of private-sector workers do not have access to an employer-sponsored retirement plan.1  Virginia, like many other states across the country, is taking steps to increase retirement savings throughout the state with their own state-sponsored retirement program.  

Businesses based in Virginia, or businesses with remote employees based in the state, are impacted by this legislation. Do you have clients with a footprint in the state? Keep reading to make sure they’re prepared.

What is RetirePath Virginia?

RetirePath is Virginia’s state-mandated retirement program. It requires businesses with 25 or more employees who have been in operation for at least two years to offer retirement benefits to their employees. Businesses can utilize the RetirePath program or certify exemption by proving they already offer a qualified retirement plan such as a 401(k) or 403(b). Businesses can find out if they are eligible here. 

RetirePath Virginia is an auto-enrollment, paycheck-deduction Roth IRA. The automatic deduction will contribute 5% of employees’ pay after taxes, and these deductions will increase by 1% each year with a cap of 10%. Each participant can change their contribution amount or opt out of the program altogether. 

Virginia passed the program in 2021, but employer registration opened in 2023. The first deadline for enrollment is on February 15, 2024. This deadline will impact businesses with 25 or more employees, with more upcoming deadlines that will impact smaller businesses. 

Businesses that do not comply with the established deadlines will face fines of up to $200 per eligible employee per year.  

If your clients already offer a qualified retirement plan, they can certify exemption on the RetirePath website. 

State plan vs. 401(k)1 

There are no costs associated with administering RetirePath Virginia. Even with that in mind, there are many reasons to consider another retirement plan option instead. 

What are the biggest differences between RetirePath and other offerings? 

• RetirePath offers a Roth IRA account, which allows employees to contribute a maximum of $7,000 (or $8,00 for those who are 50+) in 2024. A 401(k) or 403(b) plan has a higher contribution limit of $23,000 (or $30,500 for those who are 50+) for the same year. 
• State-mandated retirement plans offer a limited number of investments for users to choose from, while non-state plans may offer a wider range of investment options. 
• Administrative responsibilities fall on the employer for many state-run plans. This includes manually sending employees’ contributions to the plan with each round of payroll. Many qualified plan recordkeepers offer automated payroll integrations and may handle other administrative and compliance-related tasks.  

The retirement landscape 

State-required retirement mandates are rolling out across the country. While many state plans are similarly run, it is important to know what is required of your clients who have employees in each of these states to ensure they are compliant.