What is the New Mexico Work and Save Program? The Employer’s Guide to New Mexico Retirement Savings

New Mexicans are reaching the age of retirement with little to nothing saved to provide security in their later years. The percentage of private-sector workers with $0 retirement dollars is 67%, and 62% of New Mexicans ages 18 to 64 work for employers that don’t offer retirement plans. 

Projections indicate that the number of New Mexicans who are 60 years and older and have less than $10,000 saved will increase by more than 111,000, leading to 469,000 with small retirement savings 15 years from now. These statistics led state legislators—Senator Bill Tallman, Senator Michael Padilla, Representative Tomás Salazar, Representative Christine Chandler, and Representative Gail Armstrong—to introduce House Bill 44, which was eventually enacted as the New Mexico Work and Save Act.

What is the New Mexico Work and Save Program?

While New Mexico does have a law that would allow for the creation of a retirement savings program with a voluntary payroll deduction called the New Mexico Work and Save IRA, as well as the New Mexico Retirement Plan Marketplace, a program has not yet been launched. 

Intended to support private-sector and nonprofit employees and self-employed individuals (sole proprietors or independent contractors), the New Mexico Work and Save Act was signed into law in 2021 by Governor Michelle Lujan Grisham. It was followed by the formation of the New Mexico Work and Save Board, which is charged with establishing and directing the implementation and maintenance of the program. The Board receives administrative support from the New Mexico State Treasurer’s Office.

How will the New Mexico Work and Save Program work?

Although the latest launch deadline was supposed to be July 1, 2024, the details and operational functions of the retirement program haven’t been developed yet. There were unsuccessful attempts to determine the scope and design of it, as well as to reshape it. 

In 2021, a Memorandum of Cooperation (MoC) was signed between Colorado and New Mexico. The first of its kind, this partnership agreement would’ve enabled these neighboring states to share certain operational aspects of their retirement programs, such as administration and financial services, marketing and outreach support, and program evaluation and research. Vestwell would’ve administered it, as it does for several other state-facilitated retirement savings programs. 

Despite those efforts, the multi-state collaboration did not progress as intended. Colorado has an automatic-enrollment individual retirement account (IRA)—the Colorado SecureSavings Program, and New Mexico does not. The proposed legislation for a New Mexico employer mandate to participate in an auto-enroll IRA did not move forward, although more than a dozen states and counting have adopted similar state-run programs. Now, a New Mexico plan of any sort is indefinitely delayed, as no new implementation date or proposals have been announced. 

What employers and employees need to know about the New Mexico Work and Save Program

Some responsibilities for all participants are covered in the New Mexico Work and Save Act. If no other laws with changes to the program are enacted, this is what’s currently known about it:

• Employers will have no fiduciary responsibility.
• The program is voluntary for covered employees and employers.
• As long as there is an opt-out for employees, there can be automatic enrollment with the retirement plan marketplace, as well as automatic escalation of contributions (i.e., when the contribution percentage automatically increases annually).
• The web-based marketplace can offer different private retirement plan options, including:
  • Simple individual retirement-type plan
  • Payroll deduction individual retirement-type plan
  • Multiple-employer plan, if allowed under federal law
  • Plan described in Section 401(a) or 403(b) of the Internal Revenue Code
• The program will have a mix of asset classes, including target date funds and index funds. 
• The default investment option for participants would be a Roth individual retirement account for a target date fund investment with a default contribution rate.
  • Employees must also meet the criteria for contributing to a Roth IRA: For example, if someone’s modified adjusted gross income (MAGI) in 2025 is at least $150,000 when they’re single tax filers or at least $236,000 when they’re filing joint taxes, then they may only be able to contribute a limited amount to a Roth IRA or won’t be able to contribute anything at all. Those amounts will probably differ when the New Mexico Work and Save Program is ultimately active, but they are something to keep in mind for the future.
• The program will not allow employer contributions.
• For participating employees, there will be administrative fees to cover the costs of maintaining the marketplace, but total fees and expenses need to be kept to below 1% of the funds invested in New Mexico Work and Save.
• There will be an education and outreach plan for New Mexico Work and Save and for the retirement plan marketplace, which would also provide financial literacy.
• When the program is active, “failure to remit those contributions on a timely basis shall be subject to the same sanctions as employer misappropriation of employee wage withholdings,” as covered in the New Mexico Work and Save Act. 
• Board members are appointed for four-year terms and can be reappointed but not serve more than three full terms.

Eligibility requirements for employees

• At least age 18
• Employed full time or part time by a covered employer
• The employee can’t be covered under the federal Railway Labor Act; receive employer contributions to a multi-employer pension trust fund; or work for a federal, state, or local government or associated entity that provides supporting functions (e.g., agency, commission, etc.)

Eligibility requirements for employers

• The primary place of business must be physically located in New Mexico
• Can be engaged in a business, industry, profession, trade, nonprofit, or other enterprise, as long as they are not associated with federal, state, or local government

Benefits of the New Mexico Work and Save Program

The availability of retirement programs through companies, whether they’re an employer-sponsored plan or whether they’re a state-sponsored one, can benefit both businesses and employees. Access to retirement savings plans has been shown to increase the likelihood that employees will save. Gusto’s research on state auto-IRAs discovered that there was a 55% increase in retirement savings for median earners and below when there is access to automatic payroll deductions for retirement contributions. 

In addition, there are 33,000 small businesses in New Mexico, and 291,000 private-sector employees in the state who don’t have access to retirement savings options. This not only makes it difficult for employees to ensure their future financial security, but it also puts small employers at a disadvantage when they’re trying to retain top talent to maintain the success of their businesses. 

Gusto found that when employers on its platform provide retirement benefits, their employees are on average 40% less likely to leave those businesses within their first year of working for them. For employees working in retail, food and beverage, or other personal services, that rate actually increases to 54%. 

Retirement benefits made easy with Gusto

You don’t have to wait until the New Mexico Work and Save IRA Program is fully designed and available to consider providing a retirement savings option for your employees. Gusto can help you explore what’s involved with a 401(k) plan, along with the advantages that offering one can provide:

• Reduced cost with tax credits: Eligible businesses may be able to claim up to $16,500 in tax credits for the first 3 years of their 401(k)—potentially covering 100% of plan costs. 
• Flexible and affordable plan options: Gusto’s growing list of 401(k) partners means plenty of plans to choose from at low price points to fit your budget.
• Integrated to make life easier: Gusto payroll syncs with your 401(k) plan to make automatic deductions. Employees manage their own Gusto accounts, with access to their pay stubs, W-2s, 401(k) accounts, and contribution details. 
• Great employee benefits help you build a great team: Because 401(k) plans have higher contribution limits, employees can save more money with an employer-sponsored 401(k) than with state-mandated IRAs. Gusto’s own analysis has even found that employer-sponsored 401(k) offerings increase employee retention.

This table compares the features of a 401(k) and what’s currently known about the New Mexico Work and Save IRA that could be active in the future: 

Features	401(k)	New Mexico Work and Save IRA
Auto-enroll	Available	To be determined (TBD)
Auto-escalation	Available	TBD
Automatic payroll deductions	Available	Yes
Investment options	A large range of funds that vary based on the provider	TBD
Employer matching and profit-sharing contributions	Available	No
Investment advice	Available	Financial literacy is provided through the retirement plan marketplace
Taxability	Pre-tax and after-tax contributions are available	Roth after-tax contributions
Annual contribution limit	$23,500 for employees ($31,000 for those 50 and older; $34,750 for those ages 60 through 63), plus optional employer contributions	$7,000 for employees ($8,000 for those 50 and over)
Participant fees	Varies, but often ranges between 0.5% and 2% of the plan balance annually	TBD

If you have an existing Gusto account, learn more about our 401(k) partners here.

Or create an account with Gusto to enroll in a 401(k) plan. Gusto’s platform makes that simple.