State Mandated Retirement Plans: What You Need to Know

State retirement mandates are popping up across the country, requiring employers to offer qualified retirement benefits to their employees. The landscape is ever-changing as new states propose, vote on, and pass mandates each month.  

Let’s take a closer look at the current states with passed mandates, as well as the known deadlines, so you can be sure your clients are prepared and compliant.  

What is a state retirement mandate? 

States across the country are offering state-sponsored retirement plans that businesses can comply with at no cost. Most state-provided plans are Roth IRAs; however, some states are offering multi-employer (MEP) plans, and others offer a voluntary marketplace of plan types. 

Employers can either opt into the state plan or certify exemption by showing that they offer a qualifying retirement plan like a 401(k). While the state-offered plans are no cost to the employers, they do require business owners to handle much of the administrative and compliance-related burden of offering the plan. IRA plans also have a lower annual contribution limit which means participants aren’t able to save as much as an alternative plan type like a 401(k).

In addition, Roth IRAs have a maximum adjusted gross income (AGI) limitation, which may prevent many business owners and decision-makers from participating in the state-mandated Roth IRA. 

Are your clients impacted?

As of August 2023, there are nine states with active legislation: California, Colorado, Connecticut, Illinois, Maryland, Massachusetts, Oregon, Virginia, and Washington.1 In these states, businesses are either receiving or have received deadlines to comply with the mandate based on the number of employees they have. Businesses that don’t comply by the established deadlines will receive notices of noncompliance and be fined based on that state’s individual rules.  

Your clients aren’t headquartered in these states? It’s still important to pay attention. With the continued growth of the remote working environment, employers may need to comply with individual state mandates where they have employees living and working.  

The current state mandate deadlines are… 

 California 

• Employers with 5+ employees are already required to comply. 
• Businesses with 1+ employees must comply by December 31, 2025. 

 Colorado 

• Businesses with 5+ employees are required to comply as of June 30, 2023. 
• Further deadlines have not yet been announced. 

 Connecticut 

• Deadlines for businesses with 5+ employers passed on August 31, 2023. 
• Further deadlines have not yet been announced. 

 Illinois 

• Employers with 16+ employees are already required to offer plans. 
• The deadline for businesses with 5+ employees to comply is November 1, 2023. 

 Maryland 

• The program has launched, but not specific deadlines have been announced yet. 

 Massachusetts 

• Massachusetts offers a Voluntary Open Multiple Employer Plan meaning the program is not required so there are no passed or upcoming deadlines. 

Oregon 

• The deadline for 1+ employees passed on July 31, 2023. 

Virginia 

• This plan impacts employers who have been in business for 2+ years and have 25+ employees who work 30+ hours per week. Their deadline to register or certify exemption is February 15, 2024. 

 Washington 

• Washington employers with any number of employees are invited to participate in the state’s voluntary marketplace. There are no enrollment deadlines. 

Who’s next? 

In recent months, several new states have passed their legislation. States with passed legislation include Delaware, Hawaii, Maine, Minnesota, Missouri, Nevada, New Jersey, New Mexico, New York, and Vermont.  

If you have clients with employees in these states, it is important to keep an eye on the program websites or have a partner who can keep you up to date. Deadlines may appear with little notice, and now is the time for businesses in these states to begin thinking about how they plan to comply. If they choose not to utilize the state plan, starting a qualified exemption plan now can get them set up for future deadlines and start helping their employees move toward their financial futures sooner.   

Looking to check on the status of a state’s mandate or confirm upcoming deadlines? Visit Human Interest’s State Mandate Hub to learn more. Human Interest partners with accounting professionals to be a reason to you and your clients on all things retirement.