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State-mandated retirement plans
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Many states have begun to require small businesses to provide retirement benefits to their employees as a way to address the retirement savings gap in this country. These state-mandated retirement plans carry the added responsibility of employers choosing a plan that’s right for their business and performing various administrative tasks to comply with the laws. Businesses generally have two ways to comply with these laws—enroll their employees into a state-sponsored retirement program or sponsor a plan of their own through the private market, such as those offered by Mesirow.
Below are some high level summaries for some key states that are mandating retirement plans.
Retirement plans have evolved over the years and can now fulfill the needs of businesses large and small. For instance a Pooled Employer Plan or PEP is a type of defined contribution plan similar to the 401(k) plans offered by individual employers, but with many advantages including reduced fees, less risk and enhanced outcomes. A PEP could be an interesting alternative to any of the state run plans listed below.
Illinois
Type of plan: Individual Retirement Account (Auto-IRA).
Deadlines: Enrollment for employers with 5-15 employees , who have been in business at least two years and do not currently offer a qualified retirement plan, must register by November 1, 2023. Deadlines for employers with over 15 employees have already passed.
Fines: Employers may be subject to a $250 fine per employee for the first calendar year in which employees aren’t enrolled or don’t opt-out and $500 per employee for the second calendar year in which employees aren’t enrolled or don’t opt-out.
California
Type of plan: Individual Retirement Account (Auto-IRA).
Deadlines: Final deadline on December 31, 2023 requires employers with 1+ employees to offer a plan (mandates for businesses with 100+ employees and 50+ employees have already passed).
Fines: Employers may be subject to a $250 fine per employee if found in non-compliance 90+ days after the notice and a $500 fine per employee if found in non-compliance after 180+ days.
Connecticut
Type of plan: Individual Retirement Account (IRA).
Deadlines: Employers with 5 to 25 employees must register by August 31, 2023. (Mandates for businesses with 100+ employees and 26-99 employees have already passed.)
Fines: There are penalties, but they are currently undefined. According to the program, "If a business falls out of compliance and fails to register, an investigation could occur and there may be penalties."
Delaware
Type of plan: Auto-IRA program.
Deadlines: Expected is set to be implemented by January 1, 2025.
Fines: N/A.
Hawaii
Type of plan: IRA program.
Deadlines: Hawaii approved its optional state-run IRA program in May 2022.
Fines: N/A.
hawaii retirement savings program
Maryland
Type of plan: Individual Retirement Account (IRA).
Deadlines: The program started on September 15, 2022.
Fines: N/A.
Massachusetts
Type of plan: Voluntary Open Multiple Employer Plan (MEP).
Deadlines: The MA CORE Plan is voluntary and available to small nonprofit organizations with 20 or fewer employees.
Fines: N/A.
Minnesota
Type of plan: N/A.
Deadlines: Program details TBD.
Fines: N/A.
Missouri
Type of plan: MEP.
Deadlines: MEP program is set to be implemented by September 1, 2024. As introduced, the MEP is not mandatory and employers with 50 or fewer employees may participate.
Fines: N/A.
New Jersey
Type of plan: Individual Retirement Account (Auto-IRA).
Deadlines: The program was expected to launch in March 2022, although the implementation timeline has not yet been announced.
Fines: Employers may be subject to a written warning for the first calendar year found in non-compliance, a fine of $100 for the second calendar year in non-compliance, a fine of $250 per employee for the third and fourth calendar year, and a fine of $500 per employee for the fifth (and subsequent) calendar year.
New Mexico
Type of plan: Individual Retirement Account (IRA).
Deadlines: July 1, 2024.
Fines: N/A.
New York
Type of plan: Individual Retirement Account (Auto-IRA).
Deadlines: Employers with 10+ employees must be in compliance no later than nine months after the program is open for enrollment. As of July 2023, implementation appears to be moving forward—but final deadlines are still TBD.
Fines: TBD. As of July 2023, the program was in the process of naming a consultant to assist with program design, administration, investment management, and more.
Oregon
Type of plan: Individual Retirement Account (Auto-IRA).
Deadlines: Employers with 1-2 employees, who do not currently offer a qualified retirement plan, must register by July 31, 2023 (Mandates for employers with 5+ employees and 3-4 employees have passed.)
Fines: Employers may be subject to a $100 fine per employee (up to a maximum of $5,000 per calendar year) if found in non-compliance.
Vermont
Type of plan: Multiple-employer plan (MEP).
Deadlines: The program has been postponed until July 2025.
Fines: N/A.
Green Mountain Secure Retirement Plan
Virginia
Type of plan: Individual Retirement Account (Auto-IRA).
Deadlines: TBD (program scheduled to launch by July 1, 2023) for businesses with 25 or more employees, that have been in operation for at least two years, and do not currently offer a qualified retirement plan.
Fines: TBD
Washington
Type of plan: Voluntary Marketplace.
Deadlines: N/A.
Fines: N/A.
Publish date July 2023
Sources: are included as links to each state site.
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