In response to the continuing retirement savings crisis in the U.S., automatic enrollment plans have been set up making it mandatory for employers in the following states to offer a state payroll deduction savings program: California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, Oregon, and Washington.
A 2015 report found by the National Institute of Retirement Security (NIRS) found that the typical working household had virtually no retirement savings. Research revealed a median retirement account balance of $2,500 for all working-age households and $14,500 for near-retirement households. Furthermore, 62 percent of working households age 55-64 have retirement savings less than one times their annual income, far below what is needed to maintain their standard of living in retirement.
Let’s take a look at the requirements for each mandatory state:
Secure Choice Retirement Savings Program: An automatic payroll deduction retirement savings program for private sector employees in California who lack access to a workplace retirement plan.
- Participation is mandatory for eligible employers, those with 5 or more employees that do not sponsor their own retirement plan
- Eligible employees will be enrolled unless they opt out
- Employees will contribute via automatic payroll deduction
Secure Choice is a state-managed Individual Retirement Account (IRA) system, not an employer-sponsored retirement plan like a 401(k) or pension.
Connecticut Retirement Security Program: If an employee is over 19 years-old, makes at least $5,000 annually and their employer of more than five employees doesn’t provide a retirement plan, they will be automatically enrolled in a state-run retirement savings plan.
Illinois Secure Choice Savings Program Act: Employers must offer the Illinois operated retirement savings program if they have been in business for at least 2 years, have 25 or more employees, and do not currently offer an employer-sponsored retirement plan. Businesses can register ahead, but each group size has a required deadline.
- July 2019 for employers with 100 to 499 employees
- November 2019 for employers with 25 to 99 employees
Employees who do not opt out of the program will be automatically enrolled at a contribution rate of 5 percent.
Maryland Small Business Retirement Savings Program Act: Employers that don’t offer an employer-sponsored plan but have 10 or more employees that work 30 hours/week will be required to participate.
Massachusetts Secure Choice Savings Program: If business owners don’t offer their own retirement option, they must automatically enroll their employees into the state’s plan if they have 25 or more employees and have been in business for at least two years.
New Jersey Secure Choice Savings Program: NJ employers that have at least 25 employees and have been in business for two years are required to comply.
Oregon Retirement Savings Plan: Employers that don’t provide a retirement plan must give their employees the chance to contribute to the state-run option.
Washington Small Business Retirement Marketplace: It is voluntary for employers and employees to use the marketplace, but only those with less than 100 employees may use the marketplace plans.
The issues of mandates aside, retirement plans are one of the most attractive benefits a business can offer. CorPay Retirement Services is dedicated to offering low cost, payroll integrated retirement programs. We have 3 different solutions to fit every business need. Our integrated employer sponsored retirement plans meet these states’ requirements for alternative options. Contact us or give us a call to get your retirement plan started: 877.926.7729.