How State-Mandated Retirement Plans Are Changing the Landscape

Saving enough money for retirement has long been an issue in the United States. Forty-one million U.S. workers don’t have access to an employer-sponsored retirement plan. Of those who do, many don’t make use of it. While most people plan to retire by age 67, 41% of individuals aged 40 to 49 have less than $50K saved for retirement. 

States have begun to take on the retirement savings challenge by requiring most employers to offer the retirement plans provided by the state unless the employer already has a qualified retirement plan in place, such as 401(k) or SIMPLE IRA. 

State-sponsored retirement plans will require employers to take on the administrative burden of offering the plan to their employees and ensuring that contributions are made each pay period. 

Related Reading: A Small Business Owners Guide to Retirement Plans

Penelope webinarIn most cases, employees can opt out of the program if they choose. While the state can make a plan available to employees, it can’t force them to use it. In this guide, we’ll discuss the ins and outs of mandatory retirement plans and what they mean for your business.

What Are State-Mandated Retirement Plans?

What is a state retirement plan? State-mandated retirement plans are appearing in certain states. California was one of the first to make employers offer retirement plans to their workers. Since then, more states have introduced similar laws.

State-run plans are often cheaper than traditional retirement plans obtained through commercial investment companies. While employers usually can’t get tax benefits available through conventional retirement plans, state-run retirement plans don’t charge monthly fees to companies who enroll in them.

Related Reading: Best Retirement Plans for Small Business Owners

Which States Are Mandating Retirement Plans?

Several states have passed legislation providing for state-mandated retirement plans. So far, the following states have introduced such programs.


The California state-mandated retirement plan is CalSavers. The CalSavers Program is a Roth IRA, which means that employees who opt to enroll in the program use after-tax monies to contribute to their selected investments. 

Employers with five or more employees who don’t have another qualified retirement plan must enroll in the CalSavers Program by June 30, 2022. California has established fines for employers who are not compliant.


Connecticut has established a state-mandated retirement program known as the Connecticut Retirement Security Authority. It requires private-sector companies with five or more employees to enroll in the program. 

Employees can choose to opt out of the program. The retirement plan has not yet been fully implemented, but employers can expect future updates soon.

Penelope | Small Business Retirement


Colorado’s state-mandated retirement program is known as the Colorado Secure Savings Program. It requires employers with five or more workers who have been in business for at least two years to offer a retirement plan if they do not already have one. 

The program is expected to be implemented in October 2022, with compliance measures beginning in 2023.


Illinois Secure Choice is the Illinois state-mandated retirement plan. As in other states, employers who do not already have another retirement plan available, have more than five workers, and have been in business for at least two years are required to offer the program. 

Compliance with the legislation began in 2018 and is based on the number of employees that a company has. Employers who have five employees or more are expected to enroll by November 1, 2023.


The Maryland Saves program will begin its pilot in June 2022. Currently, not many details are available about the plan and compliance measures it may place on employers. However, businesses that are based in Maryland can opt to receive upcoming news and updates on the program.

New Jersey

New Jersey has created the Secure Choice Savings Program, which is intended to help employees save for their retirement. While the New Jersey Secure Choice Act providing for its implementation was signed in 2019, the program is not yet implemented. 

Once it comes into effect, the state will require non- and for-profit employers who have been in business for at least two years and have 25 employees to enroll.

New Mexico

New Mexico plans to implement the Work & Save program, which will provide employers access to a retirement savings plan for their workers. 

A stunning 62% of private-sector New Mexico employees work for companies that do not currently offer a retirement plan. 67% of workers have nothing saved for their retirement. The state plans to develop and implement its plan by July 1, 2024.

New York

The New York state-mandated retirement plan is known as New York State Secure Choice Savings Program. It requires all employers who have employed at least 10 New York employees during the previous calendar year and have been in business for at least two years to offer the plan. 

The plan became active at the end of 2021 but is not yet operational.


Oregon has established the OregonSaves Program. All employers are eligible to participate in the program, regardless of the company’s number of employees or how long it has been in business. 

The program is fully operational and operates as a Roth IRA. Individuals who do not have access to a retirement savings plan may choose to enroll on their own.


The Green Mountain Secure Retirement Plan was established through legislation in 2017, but its implementation is still pending due to the COVID-19 crisis. The plan is entirely voluntary for employers with 50 or fewer employees. Once implemented, it will be categorized as a multiple employer plan.


In 2021, Virginia passed a bill establishing an IRA savings program known as Virginia Saves. The program is expected to begin enrolling individuals by July 1, 2023. It will be mandatory for companies with 25 or more employees who have been in business for at least two years.

Other States

Numerous other states have passed bills or are in the process of doing so to introduce mandatory state-sponsored retirement plans. However, they have not yet been fully implemented, and most haven’t established deadlines for enrollment. 

Some states are conducting studies on the potential effectiveness of state retirement plans before moving forward with any laws. States that are considering possible programs include Washington, Utah, Ohio, West Virginia, and Louisiana. 

My Business Is in a State with the Mandate in Place. How Will It Impact Me?

The requirements for enrollment in state-mandated retirement plans vary. Some require businesses to have been established for a certain period and have a pre-determined number of employees before registration is required. 

The fees to the employer for the program are free in most cases. The only expense will be the time to enroll in the program and to ensure that employee contributions are accurately made.

If you run a business in a state with a mandated retirement plan, check your state’s regulations to determine whether you must comply with the legislation and what you need to do. 

Penelope | Small Business Retirement

State-Mandated Retirement Plans vs. Employer-Sponsored Retirement Plans

Is 401(k) mandatory for employers? Are employers required to offer 401(k)? Do I have to offer 401(k) to all employees? Unless the state where you do business has mandated implementing a retirement plan, your business is not required to offer one. 

States without a mandate set no 401(k) requirements for employers. However, offering a 401(k) can make your company more attractive to potential employees.

State-mandated retirement plans are relatively easy for an employer to participate in. While variations exist, most state plans are free to employers and require only that they enroll the company in the program and handle the administrative aspects of contributions. 

Employees can choose to opt-out of the plan. They may also set the amount they would like to contribute each pay period. 

Employer-sponsored retirement plans generally offer more variation to employees. Employees may benefit from specific options, such as vesting, employee loans, and other attractive perks. Employer-sponsored plans provide business tax benefits, such as deductions for matching contributions and credit for the fees associated with the program.

Choosing the best plan for your employees is essential. Remember that most states offer either Roth IRA plans or traditional IRAs. Both of these plans have contribution limits. 

In 2022, the maximum contribution for an IRA is $6,000 for those younger than 50. Individuals age 50 or over may contribute an additional $1,000 per year. In contrast, 401(k) contributions max out at $20,500 per year, which is more attractive to employees who want to maximize their retirement savings.

When deciding between state-mandated and employer-sponsored plans, you’ll need to determine what your company can reasonably afford. If you can’t handle matching employee deductions and the fees associated with traditional retirement plans right now, you may be better off with the state plan. 

What Are My Options to Be Compliant with Retirement Plan Mandates?

If you’re running out of time to meet your state’s retirement plan mandate compliance date, it’s best to enroll. The cost to the business is generally free, and employees can choose whether they want to participate. In the meantime, you can research other retirement plan options and choose the one that is best for your company.

These companies offer a few employer-sponsored retirement plans that cater to smaller businesses:

Their retirement plan solutions provide benefits that both small businesses and employees will appreciate.

Do You Need a Solution for Your Business?

Fundid has partnered with Penelope to make saving for the future more manageable and affordable. Penelope offers digital 401(k) retirement plans designed to fit your company’s needs, from pricing to investments to administration. 

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