A Handy Guide to State-Sponsored Retirement Programs
Individual states are stepping up to tackle the retirement crisis by rolling out retirement savings programs. The rules of these state mandated programs vary greatly from state to state, but they could help bridge the retirement gap for as many as 41 million U.S. workers who currently don’t have access to an employer-sponsored plan.
Some states have hard deadlines approaching in 2022, including California, Illinois, and Oregon. California, for example, requires any companies with at least five eligible employees to offer a plan by June 30, 2022. The state also announced penalties for companies with more than 100 employees that are not offering a private retirement plan or have not registered for CalSavers.
As your business looks to stay compliant and offer a competitive benefits package, state programs are one solution. Small businesses can also comply with state mandates by starting a new 401(k) plan with Guideline, which is fully integrated with Gusto’s payroll. It’s straightforward to get started and employers may be eligible for startup tax credits.
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Tax credits for small business retirement plans
Under the SECURE Act, the tax credit available to small businesses starting new 401(k) plans increased from $500 per year up to $5,000. The credit is available for the first three years to help with 401(k) administrative costs, and depends partly on how many non-highly compensated employees are eligible for the plan.
The SECURE Act also created a new tax credit of up to $500 per year to employers who start 401(k) plans that automatically enroll employees. Like the expanded new plan credit, this tax credit is available for three years, for a maximum credit of $1,500.
The credit is also available to employers that convert an existing plan to an automatic enrollment design. This means the new maximum eligible tax credit for offering a new 401(k) is now $5,500 for up to three years, or $16,500 in total.
Curious about how much your tax credit might be? You can estimate your total credit by answering a few questions in Guideline’s tax savings calculator.
Active and pending state-sponsored retirement plans
Outlined below are the active and pending state-sponsored programs, their current state, and upcoming deadlines. Employers that currently offer a qualified plan are not subject to the requirements. Please note: Employees must reside within the state sponsoring the program in order to participate unless otherwise noted.
|State||Program||Who’s affected?||Program status||Deadline|
|California4||CalSavers||Active||Active||June 30, 2022 for employers with five or more employees|
|Connecticut||Connecticut Secure Choice Savings Plan||Employers with five or more employees.||Pending, updates expected in 2022||TBD|
|Colorado||Colorado Secure Savings Program||Employers with five or more employees who have been in business for two or more years.||Active, the pilot program will launch in October 2022.||The deadline for compliance for the Colorado Secure Savings Program is 2023|
|Illinois||Illinois Secure Choice||Employers with five or more employees who have been in business for two or more years.||Active||Nov. 1, 2022 for employers with 16 - 24 employees and Nov. 1, 2023 for employers with 5 to 14 employees.|
|Maryland||MarylandSaves||Businesses in operation the past two years.||Enacted, pilot program begins in June 2022, open for enrollment in Sept. 2022||TBD|
|Massachusetts5||Massachusetts Defined Contribution CORE Plan||Nonprofit organizations with 20 or fewer employees||Active||TBD|
|New Jersey6||New Jersey Secure Choice Savings Program||Both non- and for-profit businesses with 25 or more employees that have been in business for at least two years||Pending||TBD|
|New Mexico||Work & Save||Voluntary savings program for private-sector and nonprofit employees and the self-employed via a Roth Individual Retirement Account||Pending, implementation deadline of July 1, 2024||Program is voluntary|
|New York||New York State Secure Choice Savings Program||All private employers who have employed at least 10 New York-based employees during the previous calendar year, and that have been in business for at least 2 years||Active, not yet operational||TBD|
|Oregon||OregonSaves||All employers with employees in Oregon||Active||Employers with four or fewer employees: Late 2022|
|Vermont||Green Mountain Secure Retirement Plan||Voluntary 401(k) multiple employer plan to employers with 50 employees or fewer||Pending||Voluntary|
|Virginia||VirginiaSaves||Employers who have been in business for at least two years with 25 or more employees||Pending implementation in July 2023||TBD|
This post is an excerpt of our 401(k) partner Guideline’s state mandate tracker, which will be updated as state-sponsored plans develop.1 The retirement gap of 41 million US workers is an approximation calculated from 32% of 127 million full time private workers who lack access to retirement benefits through their employer (based on data points sourced from the U.S. Bureau of Labor Statistics and Statisa.com in March 2022).
2 You should consult a qualified financial adviser or tax professional to verify that you are meeting the applicable state program requirements. Employer requirements to report your exemption may apply. Employee requirements may also apply and vary between states. State program details are subject to change by the state without notice and should be checked prior to making any decisions.
3 This content is for informational purposes only and is not intended to be construed as tax advice. You should consult a tax professional to determine what types of tax credits or deductions your company is eligible to claim.
4 Compare CalSavers to Guideline 401(k).
5 Applies to nonprofit organizations with 20 or fewer employees.
6 Applies to both non- and for-profit businesses with 25 or more employees that have been in business for at least two years.