By Christopher Magno, SVP/General Manager, ADP Retirement Services
In recent years, offering a company retirement plan has become mandatory for businesses of a certain size in many states across the U.S. See where your state stands — and if the state-selected plan is the best choice for your business.
A recent study found that 60% of Americans don't have a retirement-specific savings account. But thanks in part to the explosion of state retirement plan mandates, more American workers will have the opportunity to ease financial concerns and save for the years when they're no longer working.
To remain compliant, impacted employers must adopt a state-sponsored plan or select a company plan that best aligns with their business.
How many states have retirement plan mandates?
While the majority of states have considered enacting state-mandated plan legislation, fewer have actually signed such programs into law. Find out where your state stands today.
Keep in mind the deadlines and requirements for each program vary broadly by state, as do penalties for noncompliance in states with already active mandates. So, it's critical to stay compliant in order to avoid a hefty fee.
Consider all your options when evaluating a company retirement plan.
The state mandate isn't necessarily a negative, as it aims to improve retirement readiness for more workers. As an employer, offering a plan of any kind can help close the retirement savings gap while giving your employees peace of mind that you're invested in their future.
But the plans offered by states might not necessarily fit your specific needs and goals. Here are some issues to keep in mind when looking at options:
- State plans often have very limited fund choices
- They are frequently Roth IRAs, so maximum annual contributions are much lower ($6,500) compared to 401(k)s ($22,500), with no pre-tax savings
- Employers take on start-to-finish plan administration, from registering eligible employees and setting up payroll deductions to keeping plan records and money movement into the plan
In contrast, working with a partner (like ADP) provides more flexibility on plan types and features, less administrative burdens, and the ability to set up an employer match — a terrific employee retention tool that also provides employers with a tax break.
Connect with an ADP retirement specialist to explore all your options by calling 1-800-432-401K and see how offering this high-value benefit can help your company find and keep great employees.
ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor.ADPRS-20230817-4803