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 new kind 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 16-24 employees will begin no sooner than September 1, 2022.
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 June 30, 2022 requires employers with 5+ 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.
Massachusetts
Type of plan: Voluntary Open Multiple Employer Plan (MEP)
Deadlines: N/A
Fines: N/A
New Jersey
Type of plan: Individual Retirement Account (Auto-IRA)
Deadlines: Program is expected to launch in March 2022.
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 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 February 2022, implementation appears to be moving forward—but final deadlines are still TBD.
Fines: TBD. As of early 2022, 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: Registration for employers with 4 or fewer employees is targeted for late 2022 (registration deadlines for all other businesses 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.
Washington
Type of plan: Marketplace where employers can choose from a variety of plans.
Deadlines: There is no deadline.
Fines: There are no fines.
Colorado
Type of plan: Individual Retirement Account (IRA)
Deadlines: Enrollment begins 2023.
Fines: N/A.
New Mexico
Type of plan: Individual Retirement Account (IRA)
Deadlines: July 1, 2024.
Fines: N/A.
Vermont
Type of plan: Multiple-employer plan (MEP)
Deadlines: Postponed.
Fines: N/A.
Green Mountain Secure Retirement Plan
Connecticut
Type of plan: Individual Retirement Account (IRA)
Deadlines: Eligibility and deadlines will roll out in three waves
Wave 1 - Registration deadline 6.30.22 for employers with 100 or more employees.
Wave 2 - Registration deadline 10.1.22 for employers with 26-99 employees.
Wave 3 - Registration deadline 3.30.23 for employers with 5-25 employees.
Fines: N/A.
Maryland
Type of plan: Individual Retirement Account (IRA)
Deadlines: The program begins September 6, 2022.
Fines: N/A.
Publish date April 2022
Sources:
https://www.treasurer.ca.gov/calsavers/2021-Year-in-Review.pdf?vgo_ee=%2F9hke%2BJ3MVx8XCrKniCOPyX7WCjFTVwDxkDBhTN%2Fr6w%3D
https://www.ilsecurechoice.com/?gclid=EAIaIQobChMI8vPIjObK9gIV0xPUAR1mrw0ZEAAYASAAEgKpxPD_BwE&gclsrc=aw.ds
https://www.empower.com/client/mass/employer/resources/pdf/CORE-Plan-Adoption-Brochure.pdf
https://nj.gov/treasury/securechoiceprogram/
https://www.governor.ny.gov/news/governor-hochul-signs-legislation-ensuring-retirement-plan-security-private-sector-employees
https://www.oregonsaves.com/
https://retirement-marketplace.com/
https://treasury.colorado.gov/colorado-secure-savings-program
https://nmsto.gov/special-programs/work-and-save/#overview
https://www.vermonttreasurer.gov/content/green-mountain-secure-retirement-plan
https://myctsavings.com/
http://www.marylandsaves.org/
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