How state-mandated retirement plans work
More than 25 states have proposed state-mandated retirement plan legislation, and 10 states have active state-sponsored retirement plans. Find out how these new laws impact your business.
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Retirement plans
Know your state's mandate
Select a location to see your state’s retirement legislation. As state-mandated retirement legislation continues to evolve across the country, employers should check with their local representatives for the latest updates.
If you do not see your state listed, it currently has no active program or has not passed retirement mandate legislation. Check back regularly to see if your state has been added.
CalSavers - State of California IRA Program |
|
|---|---|
| Status | Active program |
| Website | CalSavers Program |
| Employers impacted | All employers with 5 or more employees. The registration deadline for employers with 1-4 employees is December 31, 2025. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 5% after 30 days 18 or older |
| Auto-escalation | 1% annual increase on enrollment anniversary up to 8% |
| Investments | 2 Funds + State Street Target Date Series |
| Penalties | 1) $250 per eligible employee if noncompliance extends 90 days and 2) $500 per eligible employee if found to be in noncompliance for 180 days |
| Additional resources | CalSavers: California retirement savings plan |
Colorado Secure Choice Savings Program |
|
|---|---|
| Status | Active program |
| Website | Colorado Secure Choice Savings Program |
| Employers impacted | Employers with five or more employees in business for at least two years. Opt-in allowed for sole proprietors and smaller businesses. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 5% following the employee’s 180th day of employment |
| Auto-escalation | Yes; increase by an additional 1% on each January 1, following the enrolled Employee’s enrollment, up to 8% |
| Investments | 3 Funds + State Street Target Date Series |
| Penalties | $100 per eligible employee per year, not to exceed $5,000 annually |
| Additional resources | Colorado SecureSavings |
MyCTSavings Program |
|
|---|---|
| Status | Active program |
| Website | MyCTSavings Program |
| Employers impacted | Employers with five or more employees, each of whom has been paid more than $5,000 in the calendar year. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 3% after 120 days for employee 19 or older |
| Auto-escalation | N/A |
| Investments | 8 Funds + Vanguard Target Date Series |
| Penalties | TBD |
| Additional resources | Connecticut Retirement Security Program |
Delaware EARNS Program |
|
|---|---|
| Status | Active Program |
| Website | Delaware EARNS Program |
| Employers impacted | Employers with five or more employees in business for at least six months of the preceding calendar year. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 5% after earning income from a Delaware employer for at least 120 days. 18 or older |
| Auto-escalation | 1% every January until 10% |
| Investments | 3 Funds + State Street Target Date Series |
| Penalties | $250 per employee per year, up to a maximum total penalty of $5,000 per year. |
Hawaii Saves Retirement Savings Program |
|
|---|---|
| Status | Legislation passed; implementation TBD. |
| Website | Hawaii Saves Retirement Savings Program |
| Employers impacted | Employers with one or more employees |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 3% |
| Auto-escalation | No |
| Investments | TBD |
| Penalties | TBD |
| Other features | $500 state match for the first 50,000 participants to contribute to the plan for 12 consecutive months |
Illinois Secure Choice Savings Program |
|
|---|---|
| Status | Active program |
| Website | Illinois Secure Choice Savings Program |
| Employers impacted | All employers with five or more employees in business for at least two years. Staggered deadlines for registration based on employer size. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 5% after 60 days for employee 18 or older |
| Auto-escalation | 1% annual increase on enrollment anniversary up to 10% |
| Investments | 3 funds + BlackRock Target Date Series |
| Penalties | (1) $250 per employee for the first calendar year and (2) $500 per employee for each subsequent calendar year the employer is non-compliant Noncompliance does not need to be consecutive to qualify for the $500 penalty |
| Additional resources | Illinois Secure Choice Retirement Savings Program |
|
Maine Retirement Investment Trust |
|
|---|---|
| Status | Active Program |
| Website | Maine Retirement Investment Trust |
| Employers impacted | All private sector employers with 5 or more employees in business 2 years or more. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | Yes - 5% |
| Auto-escalation | 1% annual increase on enrollment anniversary up to 10% |
| Investments | 3 Funds + BlackRock Target Date Series |
| Penalties | July 1, 2025 - June 30, 2026 the maximum penalty for non-compliance is $20 per employee. July 1, 2026 - June 30, 2027, the maximum penalty per employee will be $50. On or after July 1, 2027, the maximum penalty per employee increases to $100. |
| Other features | Plan available to self-employed individuals and contractors. |
Maryland$aves Secure Choice Program |
|
|---|---|
| Status | Active program |
| Website | Maryland$aves Secure Choice Program |
| Employers impacted | Businesses with at least one W-2 employee, have been in business for two years and use an automated payroll system. |
| Plan type | Roth IRA |
| Auto-enroll | 5% |
| Auto-escalation | 1% annual increase each January, up to 10% |
| Investments | 3 Funds + BlackRock Target Date Series |
| Penalties | None |
| Other features | $300 annual registration fee waived for sponsoring a plan OR participating in the Maryland$aves program. The first $1,000 is invested in an Emergency Savings Fund. |
| Additional resources | MarylandSaves |
Massachusetts Defined Contribution CORE Plan |
|
|---|---|
| Status | Active program4 |
| Website | Massachusetts Defined Contribution CORE Plan |
| Employers impacted | Voluntary for non-profit organizations with 20 or fewer employees Outstanding legislation to expand to all employers |
| Plan type | Voluntary MEP with safe harbor option |
| Auto-enroll | 6% after 60 days |
| Auto-escalation | Annual increases of 1% or 2% (based on employer’s election) up to a maximum contribution rate of 15%. |
| Investments | Empower/Great West |
| Penalties | N/A - voluntary |
| Additional resources | New Pending Legislation: Massachusetts Secure Choice Retirement Savings Plan |
Minnesota Secure Choice Retirement Program |
|
|---|---|
| Status | Legislation passed; implementation TBD. |
| Website | Minnesota Secure Choice Retirement Program |
| Employers impacted | Employers with five or more employees in business for the immediately preceding 12 months. |
| Plan type | Mandatory IRA |
| Auto-enroll | Yes - TBD |
| Auto-escalation | No |
| Investments | TBD |
| Penalties | TBD |
| Other features | TBD |
RetireReady New Jersey Savings Program |
|
|---|---|
| Status | Active Program |
| Website | RetireReady New Jersey Savings Program |
| Employers impacted | Employers with 25 or more employees in business for two years or more. |
| Plan type | Mandatory Auto IRA |
| Auto-enroll | 3% 18 or older |
| Auto-escalation | No |
| Investments | 7 Funds + Vanguard Target Date Series |
| Penalties | 1st calendar year with a violation: Written warning 2nd calendar year with a violation: $100 fine 3rd-4th calendar year: $250 for each violation 3rd-4th calendar year: $250 for each violation 5th and subsequent years with a violation: $500 for each violation |
| Additional resources | RetireReady New Jersey savings program |
New Mexico Work & $ave |
|
|---|---|
| Status | Legislation passed; target implementation date is July 1, 2024. |
| Website | New Mexico Work & $ave |
| Employers impacted | Employers with five or more employees in business for at least two years. Opt-In allowed for sole proprietors and smaller businesses. |
| Plan type | Marketplace – Voluntary Work & Save Program – Voluntary Roth IRA |
| Auto-enroll | 6% after 60 days after program enrollment |
| Auto-escalation | TBD |
| Investments | TBD |
| Penalties | TBD |
| Other features | Emergency savings TBD |
Nevada Employee Savings Trust |
|
|---|---|
| Status | Legislation passed; schedule TBD. |
| Website | Nevada Employee Savings Trust |
| Employers impacted | Employers with more than five employees who have been in business for at least 36 months. |
| Plan type | Mandatory Auto IRA |
| Auto-enroll | Yes - % TBD |
| Auto-escalation | TBD |
| Investments | TBD |
| Penalties | TBD |
| Other features | A study is to be conducted on whether to include independent contractors. |
New York Secure Choice Savings Program |
|
|---|---|
| Status | Legislation passed; implementation TBD. |
| Website | New York Secure Choice Savings Program |
| Employers impacted | Employers with ten or more employees at all times during the previous calendar year, in business for at least two years, and that have not offered a retirement plan in the preceding two years. |
| Plan type | Roth IRA |
| Auto-enroll | 3% |
| Auto-escalation | No |
| Investments | TBD |
| Penalties | TBD |
| Other features | TBD |
New York City Retirement Security for All Act |
|
|---|---|
| Status | Legislation passed; implementation TBD. |
| Website | Retirement Security for All Act |
| Employers impacted | Employers with five or more employees in the previous calendar year whose regular duties occur in the city. Also, employers who have been in business for at least two years. |
| Plan type | IRA |
| Auto-enroll | Yes - 5% |
| Auto-escalation | TBD |
| Investments | TBD |
| Penalties | TBD |
| Other features | Plan available to self-employed individuals at least 21 years of age. |
OregonSaves Program |
|
|---|---|
| Status | Active program |
| Website | OregonSaves Program |
| Employers impacted | Employers with one or more employees. Optional - Employers utilizing a PEO or leasing agency. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 5% after 60 days for employees 18 or older |
| Auto-escalation | 1% annual increase on enrollment anniversary up to 10% |
| Investments | 2 Funds + State Street Target Date Series |
| Penalties | Eligible employers must offer a plan or face a fine up to $100 per eligible employee per year (up to max of $5,000 annually) |
| Additional resources | OregonSaves – state-mandated retirement plan |
|
Rhode Island Secure Choice Retirement Savings Program |
|
|---|---|
| Status | Legislation passed; implementation TBD. |
| Website | Rhode Island Secure Choice Retirement Savings Program |
| Employers impacted | Employers with 5 or more employees and satisfies requirements to establish or participate in a payroll deposit retirement savings arrangement. |
| Plan type | Mandatory Auto IRA |
| Auto-enroll | TBD |
| Auto-escalation | TBD |
| Investments | TBD |
| Penalties | TBD |
VT Saves |
|
|---|---|
| Status | Active |
| Website | VT Saves |
| Employers impacted | Employers with 5 or more employees that have been in business for at least 2 years |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 5% |
| Auto-escalation | 1% in January of each year until a maximum of 8% is reached |
| Investments | Capital Preservation Fund and 11 Target Retirement Option Funds |
| Penalties | Before October 1, 2025: The maximum penalty is $10 per employee October 1, 2025–September 30, 2026: The maximum penalty is $20 per employee After October 1, 2026: The maximum penalty is $75 per employee |
| Additional resources | VT Saves is replacing Vermont's former plan, Green Mountain Secure Retirement Plan. |
RetirePath Virginia |
|
|---|---|
| Status | Active program |
| Website | RetirePath Virginia |
| Employers impacted | Employers with 25 or more employees in business two years or more. |
| Plan type | Mandatory Roth IRA |
| Auto-enroll | 5% |
| Auto-escalation | 1% annual increase every January up to 10% |
| Investments | 4 Funds + LifePath Index Target Date Series |
| Penalties | Up to $200 per eligible employee |
| Additional resources | RetirePath Virginia |
Washington Small Business Retirement Marketplace |
|
|---|---|
| Status | Legislation passed; implementation TBD. |
| Website | Washington Small Business Retirement Marketplace |
| Employers impacted | In business two years or more, with employees working a combined minimum of 10,400 hours during the previous calendar year |
| Plan type | Mandatory Auto IRA |
| Auto-enroll | Yes - 3-7% TBD |
| Auto-escalation | 1% per year to 10% - TBD |
| Investments | TBD |
| Penalties | TBD |
| Additional resources | Washington State Retirement Marketplace |
What is a state retirement plan?
As states continue to pass retirement legislation, employers across the county must now choose a retirement plan
that is right for their business and their employees – a critical aspect of retaining top talent.
Here’s what employers need to know about mandatory, state sponsored retirement plans:
- Definition
- How state retirement plans work
- Types of state retirement plans
- Target audience
- Requirements
- Pros and cons
When states require employers to provide their employees with retirement savings opportunities, it’s known as a state-mandated retirement or state-sponsored retirement plans. Businesses generally have two ways to comply with these laws – enroll their employees into a state-sponsored retirement plans or sponsor a plan through the private market, such as those offered by ADP.
The inner workings of mandatory state retirement plans depend on the state, but some commonalities exist. Typically, plans are administered through payroll deductions, and employees are automatically enrolled but can opt out or change how much they contribute. Employers themselves are usually prohibited from contributing to the plans.
There are, however, some exceptions to these general guidelines. For instance, Massachusetts permits Safe Harbor matching contributions by employers. Business owners should check with local authorities for specific information on how their state-sponsored retirement plan works.
State-sponsored retirement plans are commonly Roth individual retirement accounts (IRA). With this type of savings, employee contributions are deducted from post-tax income, which means their money is generally tax-free at the time of withdrawal. A traditional IRA is funded with pretax payroll deductions, lowering the employee’s taxable income. However, when the individual draws from the account, the money is subject to taxes.
State-mandated or state sponsored retirement plans are designed for low to moderate-income wage earners who work for small and midsized businesses in the public sector. These plans are entirely separate from the state-funded retirement programs for public employees.
The requirements for state-mandated retirement benefits largely depend on individual jurisdictions, the size of the organization, and how long it has been in business. Generally, employers must enroll their employees in state-sponsored retirement plans if they don’t offer another retirement plan and perform the detailed administrative and reporting work necessary under state law. These tasks can be daunting, so many employers choose one of ADP’s easy-to-manage plans instead.
Employee requirements also may vary. In states that sponsor Roth IRAs, participants must not earn more than the IRS maximum to be eligible for such plans.
Is a 401k Mandatory for Employers
Employers do not have to offer a 401(k) plan. However, in some states a retirement plan is required by state law. The Employee Retirement Income Security Act (ERISA) is the federal law that sets minimum standards for retirement plans in the private industry. It only requires that those who establish plans must meet certain minimum standards.
State-sponsored retirement plans have pros and cons, which business owners must carefully weigh. On the one hand, government-run programs are generally a low-cost solution with few fiduciary responsibilities for employers. On the other hand, these plans tend to have inflexible, one-size-fits-all designs, and businesses that miss registration deadlines may be penalized. Ultimately, whether employers choose to participate in state-sponsored retirememt plans or offer their own through the private market, the important thing to remember is that retirement benefits are a valued commodity among employees and can help improve recruitment and retention.
Why mandate retirement plans?
Some states have begun mandating state retirement plans to address this country's retirement savings
gap. Their response is based on research that shows:
The average working household has virtually no retirement savings.1
Employees are more likely to save when they have access to a 401(k) or similar plan by their employer.2
Only four in 10 businesses with less than 100 employees offer retirement benefits.3
Sign up for a 401(k) plan today and avoid penalties
Up to 3 years of retirement plan administrative costs may be covered with SECURE 2.0 Act tax incentives. Talk to an ADP Retirement Specialist.
Frequently asked questions about mandates for state retirement plans
Which states have passed retirement mandates?
As state-sponsored retirement plans become more common, several states have already passed legislation, including:
- California
- Colorado
- Connecticut
- Delaware
- Hawaii
- Illinois
- Maine
- Maryland
- Massachusetts
- Minnesota
- Nevada
- New Jersey
- New Mexico
- New York
- New York City
- Oregon
- Rhode Island
- Vermont
- Virginia
- Washington
Are any states considering retirement mandates but haven't passed them?
State-sponsored retirement plans legislation is still in flux in many states. As laws change, it is important to check with your local representative for the latest updates.
- Alaska
- Arizona
- Arkansas
- Georgia
- Idaho
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Michigan
- Mississippi
- Missouri
- Nebraska
- New Hampshire
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Pennsylvania
- South Carolina
- Tennessee
- Utah
- West Virginia
- Wisconsin
- Wyoming
Which states have not taken any steps toward introducing mandates for state retirement plans?
While state-sponsored retirement plans are rising in popularity, most states have not considered mandating a plan – yet. It is important to check with your local representatives for the latest updates.
- Alabama
- Florida
- Montana
- South Dakota
- Texas
Are employers required to offer retirement plans?
Employers generally are not required to offer their employees retirement benefits. However, some states have state-sponsored retirement plans with mandatory participation. In these jurisdictions, eligible employers must enroll their employees in the state program or provide retirement benefits on their own.
What is the Secure Choice Retirement Savings Act?
Secure Choice is the name of state-sponsored retirement plans in Illinois and New York. Although they have similar naming conventions, these plans are not the same. Each has its own requirements and participation rules.
Are there penalties for not abiding by the mandates?
Employers in jurisdictions with mandatory state retirement plans who don't comply with the requirements or miss enrollment deadlines may be penalized. The exact monetary amount of the penalty varies by state.
What are mandatory retirement contributions as related to state retirement plan mandates?
Mandatory contributions are contributions employers or employees are required by law to make and cannot opt-out of. Some states make it mandatory for state employees or others to pay into a retirement plan.
Let's Talk
Speak to a retirement specialist to understand your state's legislation and know your options.
Your privacy is assured.
This information is intended to be used as a starting point in analyzing state-mandated retirement plans and is not a comprehensive resource of all requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
Unless otherwise agreed in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisor or firm for the provision of advice; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans. All ADP companies identified are affiliated companies.
ADP, Inc. is affiliated with ADP Broker-Dealer, Inc. (“ADP BD”), a limited purpose broker dealer registered with the Financial Industry Regulatory Authority (“FINRA”), and operating pursuant to Securities and Exchange Commission (“SEC”) Rule 15c3-3(k)(2)(i), approved by FINRA to offer 401(k) and SEP/ SIMPLE IRAs, and related retirement plans (the “Retirement Products”) on a payroll deduction basis.
1 National Institute on Retirement Security
2 TransAmerica Center for Retirement Studies
3 LIMRA
4 Voluntary
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