Small employers, beware… The new state pension plan mandates are here

State-mandated pension plans are evolving and gaining in prevalence in the United States in response to the retirement savings crisis. While a few states have already implemented mandatory pension plans, 10 states are currently working to implement similar requirements into law or upgrade their already-existing mandates.

Depending on the state, there are several factors to be aware of in order to avoid non-compliance and the risk of sanctions. Small employers in affected states need to understand how to navigate their state pension plan mandates and what that means for them in the future.

Generally, businesses must comply with these laws in two ways. They can either automatically enroll their workers in a state-sponsored retirement program or sponsor their plan through a qualifying private plan. Here is an overview of the upcoming terms for each affected state.


Since 2016, California has implemented retirement plan mandates for all private sector companies, allowing companies to choose between a traditional IRA or a Roth IRA for their employees. For the past two years, the state has required companies with more than 50 employees to enroll in either California’s CalSavers plan or another qualifying retirement plan.

California is now expanding the mandate to require all private businesses with 5 or more employees to register by June 30, 2022. Any California organization that fails to comply will be fined $250 for each skilled worker if they fail to comply. not comply 90 days after notice. If there is continued non-compliance for more than 180 days after notification, they will be fined $500 per qualified worker.


The Colorado State Legislature passed the Colorado Secure Savings Program in 2020, with a pilot program launching in October 2022 and statewide enrollment starting in 2023. Although the full scope of the rules and regulations are not finalized until July, the mandate applies to all Colorado employers without an existing pension plan that have operated for at least two years with 5 or more employees.


Connecticut’s state-sponsored retirement plan, MyCTSavings, was adopted in 2016 and recently became fully active. It is mandatory for all business owners with more than five workers who do not provide a private qualification plan to register for the program in 2022.

The MyCTSavings program is a state-operated Roth self-IRA that costs employers nothing, works with any company’s payroll process, and requires minimal employer administration because it is supervised. by the state.


Illinois introduced its state-mandated retirement plan, Secure Choice, starting in 2018 with businesses with 500 or more employees, followed by a second phase in 2021 that expanded its requirements to include businesses with 25 or more employees. employees or more.

Now, businesses with 16-24 employees must enroll by November this year, and employers with 5-15 employees will need to enroll by November 2023. Employers who do not enroll in the Secure Choice or a qualifying private plan is subject to an initial penalty of $250 per employee, followed by an additional penalty of $500 per employee for each subsequent year if non-compliance persists.


Similar to the Connecticut mandates, Maine is rolling out a state-sponsored Roth self-IRA plan overseen by the Maine Retirement Savings Board for businesses that have been active for at least two years, have more than 5 employees, and do not offer a plan. eligible private. .

Maine employers have more time than those in other states and relatively lower penalties. Companies with 25 or more employees must be enrolled in a pension plan by April 1, 2023, companies with 15-24 employees by October 21, 2023, and companies with 5-14 employees by October 1, 2023. April 2024. The maximum penalty employers can face for non-compliance is up to $50 until 2026.


Maryland is launching its pilot phase of its state-sponsored retirement program, MarylandSaves, in September 2022. While employers can expect penalties for non-compliance and specific deadlines for enrolling, the exact details of the state mandate are yet to be finalized.

New Jersey

New Jersey recently launched its state-sponsored self-IRA program, Secure Choice Savings Program, overseen by the Secure Choice Savings Board. The program came into effect on March 28, 2022, but employers with 25 or more employees who have been in business for at least two years have until December 28, 2022 to enroll in the program or another eligible private plan.

Non-compliant employers will receive a written warning after the first year and will be fined $100 after two years, $250 after the third and fourth year, and $500 for each continuous year.

New York

The New York State Secure Choice Savings program will be effective no later than August 9, 2023 for businesses with 10 or more employees without a qualifying plan. However, for New York City businesses, employers with 5 or more employees must also adhere to the mandate. Although all the details have not been specified, registration should begin before October 21, 2023.


Oregon’s state-sponsored program, OregonSaves, has been running in phases since 2017, with the final phase requiring businesses with 4 or fewer employees to enroll in a retirement program in early 2023, though the date exact limit has not been published. Employers who fail to comply face a fine of $100 per employee, up to $5,000 per year.


Beginning in July 2023, all employees age 18 or older who work 30 or more hours per week without an employer-sponsored retirement plan will automatically be enrolled in a state-sponsored IRA plan, the VirginiaSaves program. Although exact implementation dates have not been made official, the program is expected to begin in July 2023. Employers in Virginia are not responsible for enrollment in the program, however, tax-deductible employer contributions to the state-sponsored program will not be permitted.

What’s next for small employers?

As these state mandates continue to roll out over the next 1-2 years, it is important that small employers keep an eye out for specific deadlines, rules and regulations to avoid penalties. However, the benefits of providing pension plan options to your employees still outweigh the risks of not complying with state mandates. Especially in the midst of the Great Resignation and a volatile economy, it’s more powerful than ever to offer great benefits to your employees to not only attract and retain talent in an uncertain job market, but to show your employees that you care about them and their financial future.

Brian Menickella is co-founder and managing partner of The Beacon Group of Companiesa broad based financial services company based in King of Prussia, PA.

Securities and advisory services provided by LPL Financial, a registered investment adviser. Member FINRA/SIPC.

This material was created for educational and informational purposes only and is not intended to serve as ERISA, tax, legal or investment advice.

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