These 10 States Have Retirement Plan Mandates or Are Working on Implementing Them:
-California
-Oregon
-Illinois
-Maryland
-Colorado
-Connecticut
-New York
-New Jersey
-Virginia
-Washington (Seattle Only)
-Maine
As the legal cannabis industry grows so too does the need for cannabis companies to address the retirement savings gap experienced by workers in the industry. This is especially the case as auto-IRA retirement plan mandates, which generally apply to cannabis companies as well, gain momentum throughout the U.S. As of September 2021, four states with legal recreational or medical cannabis programs—Oregon, California, Illinois, and Maryland—have mandates in place requiring companies of specific sizes to adopt plans that automatically enroll employees into an IRA. Seven other states with legal cannabis are currently in the process of adopting similar mandates. Cannabis companies are generally not exempt from these mandates!
Thus, depending on where your cannabis business operates, there are specific retirement plan adoption deadlines that your company will be required to meet in order to continue operating legally and avoid penalties. We've broken down these mandates - and the retirement plan alternatives accessible to cannabis companies - by state to make them easier to understand.
California: Large and Small Companies Alike Must Have Retirement Plans
California is one of four legal cannabis states that already has a retirement plan mandate for private sector workers in place. They launched their state-sponsored retirement plan, CalSavers, in 2016, which allows companies to choose from a Roth IRA or a traditional IRA for employees.
On June 30th, 2022, all California cannabis businesses will be required to be enrolled in CalSavers or a qualified plan. If California cannabis enterprises fail to comply, they will be fined $250 per eligible employee if non-compliance continues for 90 days or more after the notice, and $500 per eligible employee if non-compliance continues for 180 days or more after the notice.
Oregon: Companies with 4 or Fewer Employees Must Register by Early 2023
Oregon also requires cannabis employers offer retirement plans to employees, be it through their state-sponsored plan, OregonSaves, or a private qualifying plan like what is offered at Leading Retirement Solutions. The state does not require employer contributions. As of January 1st, 2020, if a company is cited for non-compliance, they must pay a fine of $100 per affected employee, up to a maximum of $5,000 per calendar year.
The state’s retirement plan mandate program has been implemented in six phases, starting with private companies with the largest number of employees. Cannabis companies with 4 or fewer employees are the last wave to be required to register, and the deadline for registration is targeted for early 2023 according to the OregonSaves website.
Illinois: Secure Choice Savings has New Registration Waves in 2022 and 2023
In 2015, Illinois enacted a retirement plan mandate, administered by the Illinois Secure Choice Savings Board. The program formally launched in phases in 2018, starting with companies with more than 500 employees. As of 2021, all cannabis companies with at least 25 employees are required by law to have a retirement savings plan.
There are two additional employer registration waves left: Employers with 16-24 employees will be required to register by November 2022, and employers with 5-15 employees will be required to register by November 2023. Cannabis companies that do not enroll in Illinois Secure Choice or a qualifying plan will face a penalty of $250 per employee for the first year, and $500 per employee for each following year.
Maryland: Retirement Program Set to Enter Pilot Phase in 2022
Maryland$aves, Maryland’s mandated retirement savings program, was enacted in 2016 and is on-schedule to enter its pilot phase in 2022. Under this new state mandate, it will be mandatory for all cannabis employers that use a payroll system or service to opt into Maryland$aves or a qualifying private plan.
Cannabis employers may face penalties for non-compliance although the law does not detail them yet. Notably, Maryland is the only state on this list that does not have a recreational cannabis program, but this law still applies to all medical cannabis businesses.
Colorado: Retirement Savings Program will Launch 2022
Colorado is in the process of implementing their new mandated retirement savings program, Colorado Secure Savings Program, after it’s legislation passed in 2020. The mandate applies to any Colorado cannabis company without an existing plan that employs five or more employees and who’s operated for at least 2 years. Employer contributions are not permitted unless a qualifying private plan is adopted.
Cannabis employers found to be non-compliant will face a fine of up to $100 per year for each unenrolled eligible employee, with a maximum penalty of $5000 in a calendar year. The roll-out of the program will be done in phases, and the formal launch of the program is anticipated for October, 2022.
Connecticut: Launching Their Mandatory Program in 2022
The law that created Connecticut’s state-sponsored retirement plan program, MyCTsavings, passed in 2016. The program, which exited its pilot phase in March 24, 2022, is now officially active. This program is mandatory for all employers with five or more employees who do not already offer a qualifying private plan. The program is designed, implemented, and monitored by a state-appointed board.
Similair to other retirement plan mandates, Connecticut's program is a Roth auto-IRA which relies on payroll deductions. This program is created to help those who desire to save retirement, but do not have proper access to a retirement plan through their employer.
New York City: More Information About Mandated Plans by August 2023
In 2021, New York City enacted a law that states cannabis employers with at least 5 employees that do not currently offer their workers a way to save for retirement must participate in the state’s New York Secure Choice Savings Program, which automatically enrolls employees in an Roth IRA. Businesses that do not enroll will face a penalty of $250 per employee for the first year, and $500 per employee for each following year, and the fines go up from there for each consecutive year of non-compliance.
New York’s Secure Choice Savings Program was originally enacted in 2018 and is in the process of being implemented. By law, the program will be in operation no later than August 9th 2023 and impact companies without a qualifying private plan. So, cannabis companies in New York state should expect to start seeing more information about plan deadlines soon.
While cannabis employers will be enrolled through the same state-sponsored program, those based in New York state will now also be subject to the mandate. This bill, passed October 21st, 2021, requires cannabis employers with 10 or more employees to choose between the state-sponsored plan or a qualifying private plan. Enrollment is slated to begin before October 21st, 2023, although the bill allows for an aditional 12 months for implementation.
New Jersey: Implemented March 2022
New Jersey enacted the New Jersey Secure Choice Savings Program in 2019, requiring companies with 25 or more employees to either opt into their state-sponsored auto-IRA retirement plan, or into another qualifying private plan. If a cannabis employer does not comply by the first year, they receive a written warning from the state; the second year, they are fined $100 per employee not enrolled; the third and fourth year, they are fined $250 per employee not enrolled; the fifth year onward, they are subject to a $500 fine per employee not enrolled in the program. Those fines increase for any employer who collects employee contributions.
Per the original bill, the program was to become effective on March 28, 2021, with the objective of enrolling everyone by the end of 2021. Due to the pandemic, however, the program is in effect as of March 28th, 2022. Implementation will be phases starting with larger companies. Each company will have nine months to implement the state program or a qualifying plan when the size of their company is within the rage of the requirements of New Jersey legislation.
Virginia: Will Begin to Enroll Employers in Summer of 2023
In 2021, Virginia’s mandatory retirement savings program, the VirginiaSaves Program, was enacted into law. Under the bill, Virginia employees 18 or older working more than 30 hours per week who do not already have access to an employer-provided retirement plan will be automatically enrolled in a state-facilitated individual retirement account (IRA) savings program. Employer contributions are prohibited.
The design of the program is still being completed by the administering board, and they are also still establishing an implementation timeline. That said, program is slated to begin operations July 1, 2023.
Washington: Seattle’s Retirement Plan Deadlines Not Yet Specified
The city of Seattle enacted their mandatory retirement savings program in 2017, which is overseen by the mayor. In 2018, officials delayed the implementation of the program. As of 2022, Seattle's retirement mandate has still not been implemented.
However, Washington state has implemented a retirement plan marketplace. Retirement plan marketplaces allow each employee to take charge and choose the IRA that is right for them. Cannabis business employers do not have to sponsor the plan to the employees directly, as each employee can voluntarily contribute to their retirement account through the retirement marketplace.
Maine: Auto-IRA Program Will Begin Rolling Out in 2023
As of June 24th, 2021, Maine passed legislation to establish a mandated auto-IRA plan for companies with more than 5 employees—including those cannabis companies engaging in their recreational program. Overseen by the Maine Retirement Savings Board, the state-sponsored program is a payroll deduction Roth IRA that must be offered by any individual or entity engaged in business in the state of Maine that has been active for at least 2 years. Employers may opt out of the state-sponsored program if they offer another qualifying plan.
The plan will be rolled out in three implementation phases:
- Implementation will begin on April 1, 2023, when companies with 25 or more employees must have a program for employees in place.
- By October 21st 2023, companies with 15 to 24 employees must have a program in place.
- April 1, 2024, companies with 5 to 14 employees must follow suit.
The penalties for non-compliance prior April 1, 2024 is, at maximum, $10 per employee. Between April 1st 2024 and March 31st 2025, the maximum fine per employee will be $25. From April 1, 2025 to September 30th, 2026, the maximum penalty per employee goes up to $50.
Offering a Retirement Plan is Good For Business
While complying with these mandates may seem like a hassle, offering retirement plans is a boon for business and about more than avoiding non-compliance penalties. In fact, a CNBC report highlighted that 81% of workers like companies that automatically enroll their workers in a 401(k) plan, suggesting that having quality retirement benefits in place is an effective tool for attracting and retaining cannabis industry talent.
Leading Cannabis 401(k) Plans - Boldly Designed to Grow as You Do
While the rest of the financial services sector has been hesitant to work with cannabis companies, Leading Retirement Solutions is boldly offering retirement plans that are designed specifically to help experienced teams in this dynamic industry. LRS has been partnering with cannabis businesses since 2014 to provide them with the retirement solutions that grow and adapt with the company. Given our extensive experience in the cannabis industry, we understand the whiplash many cannabis companies are feeling as they go from being told that having a retirement plan is illegal (it’s not) to being told that it’s illegal not to have one.
The Leading Cannabis 401(k)® was designed specifically for companies in the cannabis industry by a team of legal, financial, and retirement industry experts.
For more tips and information regarding retirement plans, contact us.
