More than a million Virginia workers don't have access to a retirement plan through their employer, so the state launched RetirePath Virginia in 2023. RetirePathVA is a state-run Roth IRA that certain businesses are required to offer their employees (unless they offer a qualified retirement savings alternative).
In 2026, Virginia expanded the retirement savings requirement to reach far more small businesses, lowering the employer threshold from 25 employees to just five.1 This is a wide-spread trend—Virginia is one of many states that have established programs to make it easier for businesses to provide retirement benefits and help employees save for their futures.
If your business has five or more employees in Virginia, has been operating for at least two years at the time of enrollment, and doesn't already offer a qualified retirement benefit, you likely need to act.1 Here's what you need to know about RetirePath Virginia, how it works, the pros and cons of the state-run Roth IRA, and why many employers choose alternatives like Gusto 401(k) plans instead.
What is RetirePath Virginia?
Virginia passed the law establishing RetirePath in 2021, and the program launched in 2023. Until recently, it only applied to Virginia businesses (for-profit or nonprofit) that were in business for at least two years, had 25 or more eligible employees, and didn't already offer a qualified employer-sponsored retirement plan.
As of July 1, 2026, that eligibility threshold dropped from 25 employees to five, making an estimated 35,000 additional Virginia businesses eligible to comply. Registration deadlines to comply with this new threshold are staggered by business size:1
Businesses that first became eligible in 2026 with 25 or more eligible employees, must register by October 30, 2026.
Businesses with 10–24 employees must register by September 30, 2026; and
Businesses with 5–9 employees must register by October 30, 2026
Businesses that became eligible prior to 2026 with 25 or more eligible employees were already required to register under the original mandate. Learn more at the RetirePath Virginia website.
How does RetirePath Virginia work?
RetirePath Virginia is an automatic payroll deduction Roth IRA, meaning eligible employees are enrolled automatically unless they opt out. Contributions come out of each employee's paycheck on an after-tax basis, so when it's time to take distributions after age 59½, those wages and investment earnings are generally not taxed.2
Who's eligible to participate in RetirePath Virginia
To participate, employees must be:
18 or older
Employed in Virginia and receiving taxable income
Temporary or seasonal employees who've worked fewer than 90 days in the year have the option to open a RetirePath account independently. Participating employers must enroll seasonal or temporary employees who work more than 90 days a year, provided the employee meets the eligibility criteria
Enrollment process and contribution rates for RetirePath Virginia
Once enrolled, employees have 30 days to opt out, change their contribution rate, or elect a Traditional IRA instead of the default Roth IRA. If they don't act, they're automatically enrolled in a Roth IRA at the default contribution rate of 5% of gross pay, which increases automatically by 1% each January up to a maximum of 10% (once an account has been open more than 180 days). After the 30-day window, employees can still change their contribution rate, as long as it stays at or above 1% and within the annual IRS limits. For 2026, those limits are $7,500 for employees under 50 and $8,600 for those 50 and older.3
Investment options for RetirePath Virginia
Contributions first go into the Capital Preservation Fund for 30 days. If no other election is made, savings automatically move into one of several Target Date Retirement Funds based on the saver's age — diversified portfolios that grow more conservative as retirement nears. In total, RetirePath Virginia offers 15 investment funds.
How much does RetirePath Virginia cost?
RetirePath Virginia has no employer fees. There are no setup fees and no required employer contributions.
Your employees, however, will pay a $27 annual per-account fee (billed at $6.75 per quarter), plus an asset-based fee ranging from 0.22% to 0.32% depending on their investment choice — that's $0.22 to $0.32 for every $100 in their account. These fees are deducted directly from employees' accounts.4
By comparison, a Gusto 401(k) doesn't charge employees a flat per-account fee on top of asset-based fees.5 Employees also get access to professionally managed portfolios,5 a broader range of investment options,6 and the ability to contribute pre-tax.
Comparing Gusto 401(k) and RetirePath Virginia:
Gusto Starter 401(k) | RetirePath Virginia | |
Retirement plan type | Starter 401(k) | Roth IRA |
Tax benefit | Pre- or post-tax | Post-tax only |
Employee asset-based fee | 0.25%5 | 0.20%4 |
Underlying Fund Expense Ratios | 0.02% – 0.10% | 0.02% – 0.12% |
Additional active employee fees | None | $27/year account fee |
Custom model portfolios | 6 | 0 |
Investment options | 40 | 15 |
Exempt from IRS testing | Yes | Yes |
Scales to a standard 401(k) | Yes10 | No |
Monthly employer fee | $49/month + $6 per participant7 | $0 (no employer fees) |
Pros and cons of RetirePath Virginia
RetirePath Virginia removes a real barrier for employees who'd otherwise have no retirement savings option at work. But like any program, it comes with tradeoffs worth understanding before you decide how to comply.
Pros of RetirePath Virginia:
No employer contributions or fees.
Meets state-mandated compliance.
Auto-enrollment can help improve employee participation.
Accessible for all employees, including part-time and seasonal workers.
Cons of RetirePath Virginia:
Roth only.
Lower contribution limits than most 401(k)s.
Limited investment options.
No loan option.
Do businesses have to use RetirePath Virginia?
If your business already offers a qualified employer-sponsored retirement plan, you're exempt from the mandate. Qualifying plans include:
401(k) or other 401(a) plan
403(a) — qualified annuity plan
403(b) — tax-sheltered annuity plan
408(k) — Simplified Employee Pension (SEP) plan
408(p) — Savings Incentive Match Plan for Employees (SIMPLE IRA)
457(b) — governmental tax-deferred compensation plan
Already offering a qualified retirement plan doesn't mean you can simply do nothing. Employers with a qualifying plan still need to certify their exemption through the RetirePath Virginia portal at retirepathva.com. You'll need your access code (provided in the notification you receive from the state program) and your Employer Identification Number (EIN) to do so.
Employers that don't register or certify an exemption by their deadline may face a penalty of up to $200 per employee, per year.1
Why many employers choose a 401(k) instead of RetirePath Virginia
While RetirePath Virginia fulfills the mandate at no cost to the employer, many employers choose a 401(k) instead. A 401(k) can offer more for both employers and employees, often without costing as much as you'd expect.
Higher contribution limits: Employees can contribute up to $24,500 to a 401(k) in 2026 — more than three times the $7,500 IRA limit. Those 50 and older can contribute up to $32,500, and employees ages 60–63 can put away up to $35,750 under the SECURE 2.0 super catch-up provision.3
Employer matching: Unlike RetirePath Virginia, a 401(k) lets you match employee contributions, which can be a meaningful recruiting and retention advantage.
Pre-tax and Roth options: A 401(k) can support both traditional pre-tax contributions and Roth after-tax contributions, giving employees more flexibility in how they save.
Significant tax credits: Thanks to the SECURE 2.0 Act, eligible small businesses may be able to claim up to $16,500 in tax credits over the first three years of offering a 401(k) — potentially covering 100% of plan costs.9
Payroll and retirement all in one place: With Gusto, payroll and your 401(k) live in the same platform — no separate tools, no manual syncing.
FAQs
Which Virginia employers are required to participate in RetirePath Virginia?
The mandate applies to businesses that have been registered in Virginia for at least two years, employed at least 5 eligible employees, and don't already offer a qualified employer-sponsored retirement plan. Both for-profit and nonprofit businesses are covered.
Can employees opt out of RetirePath Virginia?
Yes. Employees have 30 days after automatic enrollment to opt out. If they don't, they'll be enrolled in a Roth IRA with a default contribution rate of 5% of gross pay. They can adjust their contribution rate or opt back in at any time.
What is the default contribution rate for RetirePath Virginia?
The default contribution rate is 5% of gross pay, increasing automatically by 1% each January up to a maximum of 10%. Employees can change this to a different percentage at any time, up to the annual IRS limit ($7,500 for those under 50; $8,600 for those 50 and older in 2026).3
What are the new registration deadlines for RetirePath Virginia?
Employers newly eligible under the 2026 expansion must register by September 30, 2026 (10–24 employees) or October 30, 2026 (5–9 employees, and newly eligible employers with 25 or more employees). Employers that were already eligible under the original 25-employee mandate had earlier deadlines that have now passed. 1
Does offering a 401(k) exempt my business from RetirePath Virginia?
Yes. Businesses that already provide a qualifying employer-sponsored retirement plan — including a 401(k), 403(b), SEP IRA, SIMPLE IRA, or similar plan — are exempt from the mandate. You'll still need to certify your exemption through the RetirePath Virginia portal using your access code and EIN.
Disclosures:
Gusto Retirement Services, LLC, Gusto Inc.'s affiliate, has prepared this summary from third-party sources as of August 2026. The information herein is considered to be reliable at the time of writing, may not necessarily be all-inclusive, is not guaranteed as to accuracy and is subject to change at any time without notice. The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein.
Material provided herein may contain content from Gusto, Inc. and its affiliates, each a separate entity with different regulatory requirements and standards. References to 'our' or 'we' refer solely to Gusto Retirement Services, LLC ('Gusto Retirement' or 'Gusto 401(k)') unless otherwise specifically stated. The information in this material is for informational purposes only and is not intended to be an offer, recommendation, investment advice, legal or tax advice, or a solicitation to buy or sell any security. Investment advisory services for Gusto's 401(k) (when 3(38) fiduciary services are selected) and IRA products are offered by Gusto Investment Services, LLC, an affiliated SEC-registered investment adviser. For more information regarding these services, see the ADV 2A Brochure and Form CRS. Recordkeeping services for Gusto's 401(k) and IRA products are offered by its affiliate, Gusto Retirement Services, LLC. 3(16) plan administrative services are also offered by Gusto Retirement Services, LLC and only made available to clients who use the integration services available through Gusto's payroll service. Gusto Retirement Services, LLC uses a third-party to provide custodial services.
1 Virginia's RetirePath mandate expanded on July 1, 2026, lowering the eligible-employer threshold from 25 to 5 employees under legislation signed by Governor Spanberger. Employers newly eligible under this expansion must register by September 30, 2026 (10–24 eligible employees) or October 30, 2026 (5–9 eligible employees and employers that first became eligible in 2026 with 25 or more eligible employees). Employers already eligible under the original 25-employee mandate had earlier deadlines that have now passed.Non-compliance may result in a penalty of up to $200 per employee, per year. Requirements to report an exemption apply. Gusto has prepared this summary from third-party sources as of August 2026. Deadlines, thresholds, penalties, and other program details are subject to change by the Commonwealth of Virginia without notice and should be checked prior to making any decisions. Please consult RetirePath Virginia's site (https://www.retirepathva.com) for the latest program details and exemption information.
2 Roth contributions are always distributed tax-free. The earnings on Roth contributions will generally be tax-free if the following conditions are met: (a) you're either over age 59 ½, disabled, or have died AND (b) it has been 5 years since your first Roth contribution under the current plan. Please consult a qualified financial advisor or tax professional to determine what is applicable to your financial situation.
3 May be adjusted annually to account for IRS cost-of-living adjustments. Learn more
4 RetirePath Virginia charges an asset-based fee of between 0.22% and 0.32% (comprised of an underlying investment fee plus a 0.20% Program Administration Fee) on assets under management, according to the RetirePath Virginia Program Description. In addition, an annual account fee of $27.00 per year (charged quarterly at $6.75) is payable to the program administrator by employees. Fees are subject to change at any time without notice and should be checked prior to making any decision.
5 Investment advisory services for Gusto's 401(k) product (when 3(38) fiduciary services are appointed) are offered by Gusto Investment Services, LLC, an affiliated SEC-registered investment adviser. An assumed annual account fee of 0.25% is applied to assets under management and is deducted on a monthly basis. Alternative account fee pricing is available, ranging from 0.15% to 0.35%. See the ADV 2A Brochure and Form CRS.
6 View full fund lineup.
7 See here for more information regarding fees. There may be sales tax applied to your invoice dependent on the state in which you are located. You should consult a tax professional and/or financial advisor to determine the best tax-advantaged retirement plan for your situation.
9 You should consult a tax professional to determine what types of tax credits or deductions your company is eligible to claim. Tax credit services are provided by Gusto, Inc. Note that any employer contribution credit cannot also be used as a deduction. Actual eligibility and credit amounts depend on the number of employees, employee compensation levels, and individual tax circumstances. Please contact a financial, tax, and/or legal advisor to determine what applications and products are appropriate for your specific circumstance. Gusto does not act as a fiduciary when providing this service.
10 Please note, under current IRS rules Starter 401(k) plans can only be converted to full 401(k) plans (increased limits, employer contributions, and testing) effective the first day of the plan year. This would require moving to the Core or Premium tier at the beginning of a calendar year.
