As of June 2023, 11 states and 2 cities are planning to institute mandated retirement programs. While companies can choose to opt out of their respective state-mandated program, they must have a qualified retirement plan in place by certain deadlines or risk paying significant fines.
However, if your state is not listed here, this does not mean that your employer will be exempt forever. Retirement plan mandates are gaining in popularity and are impacting more states each year. This move to increase retirement plan participation is an important step towards stabilizing the long-term financial security of those who are self-employed or are working for a company that does not already offer a retirement plan.
The type of retirement plans that are deemed “qualified” vary from state to state. Most offer a wide range of plan options; however, some reject the use of Payroll Deduction IRAs. To help clear this up, we’ve organized and listed the states, the programs themselves, and the specific options for qualified retirement plans available.
What is a Qualified Private Retirement Plan?
A qualified retirement plan is a retirement plan that has met certain requirements as outlined by the IRS. Qualified retirement plans afford employees certain benefits such as tax deductions, although specific benefits vary between plans.
There are two main types of qualified retirement plans: defined contribution plans and defined benefit plans, although defined contribution plans are far more common.
Qualified Retirement Plans by State
California
California’s state-administered retirement plan program, Calsavers, is an Auto Individual Retirement Account (IRA). Calsavers, which is now active, allows its users to customize their investments from a variety of funds. However, companies who do not want to participate in California’s state program can choose from a variety of alternate qualified plans.
These include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- Payroll deduction IRAs with automatic enrollment
Colorado
Colorado’s state-administered retirement plan program: Colorado Secure Savings Program, is a Roth Individual Retirement Account (IRA) funded through payroll deductions. This program was instituted along with a mandate which extends to all companies that have five or more employees. Even though a retirement plan or qualifying alternative is mandatory for certain private-sector companies, there are a variety of options besides the program produced by the state.
These include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- 457(b) Government Deferred Compensation plan
Note: qualified plans in Colorado do not include payroll deduction IRAs.
Connecticut
Connecticut’s state-administered retirement plan program, MyCTSavings, is a Roth Individual Retirement Account (IRA). Connecticut’s retirement program has passed legislation and instituted its pilot program in October 2021. However, companies have a choice between enrolling in MyCTSavings or supplementing their enrollment with a different qualified plan.
These include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- 457(b) Government Deferred Compensation plan
Note: qualified plans in Connecticut do not include payroll deduction IRAs.
Hawaii
Hawaii's state-administered retirement plan program, Hawaii Retirement Savings Program (HRSP), will be an Roth Individual Retirement Account (IRA). HRSP, is expected to be up and running by July 1st, 2024 and enrollment is mandatory for employers not already enrolled in a qualifying plan. However, companies who do not want to participate in Hawaii's state program can choose from a variety of alternate qualified plans.
These include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- Payroll deduction IRAs with automatic enrollment
Illinois
Illinois’ state-administered retirement plan program, Illinois Secure Choice, is a Roth Individual Retirement Account (IRA), although they have stated that other options may become available. Illinois’ program is currently up and running. Companies who operate with five or more employees must enroll either in the Illinois Secure Choice program or a plan deemed qualified by the state.
These include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- 457(b) Government Deffered Compensation Plan
- Taft-Hartley plan
Note: qualified plans in Illinois do not include payroll deduction IRAs.
Maine
Maine’s state-mandated retirement program was enacted in 2021. Maine’s program is a Roth Individual Retirement Account (IRA) funded through payroll deductions. Enrollment will be in three phases beginning in 2023 with the following dates: 25 or more employees on April 1, 2023 / 15–24 employees on October 1, 2023 / 5–14 employees on April 1, 2024. When it is implemented, however, companies will have to choose between the state-administered program or a qualified plan.
These include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- A 457(b) Government Deferred Compensation plan
- Payroll deduction IRAs with automatic enrollment
Maryland
Maryland’s state-administered retirement program, Maryland$aves, launched to employers September 15, 2022, and is a Roth Individual Retirement Account (IRA). Companies that do not want to participate in Maryland’s program can choose to enroll in a different qualified plan. However, companies have a choice between enrolling in Maryland$aves or supplementing their enrollment with a different qualified plan.
These include:
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- A 457(b) Government Deferred Compensation plan
Note: qualified plans in Maryland do not include payroll deduction IRAs.
New Jersey
New Jersey’s state-administered retirement plan program, The New Jersey Secure Choice Savings Program, will be a Roth Individual Retirement Account (IRA) and funded through payroll deductions once implemented. NJ Secure Choice applies to for-profit and non-profit employers in the public sector who have 25 or more employees, been in business for at least two years, and not offered a qualified retirement savings program in the past two years. Companies, who do not want to participate in New Jersey’s program can choose from a variety of alternate qualified plans.
These qualified plans include, but are not limited to:
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
New York (City and State)
New York City’s city-administered retirement plan program, the New York Secure Choice Savings plan, is set to be a Roth Individual Retirement Account (IRA). All companies with five or more employees within the city would be required to enroll their employees in a retirement plan. Private sector employees throughout the entire state with at least 10 employees will now be forced to enroll in the New York Secure Choice Savings plan or another qualified plan.
Qualified plans include, but are not limited to:
- A qualified retirement plan under Internal Revenue Code Section 401(a)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- A 457(b) Government Deferred Compensation plan
Oregon
Oregon’s state-administered retirement plan program, OregonSaves, is a Roth Individual Retirement Account (IRA). Private businesses with one to three employees have until July 31, 2023 to register for OregonSaves. The deadline for all other employers in the state has passed. Under the legislature, every company must offer the state-administered program or a qualified plan.
Qualified plans include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- A 457(b) Government Deferred Compensation plan
Note: qualified plans in Oregon do not include payroll deduction IRAs.
Virginia
Virginia’s state-administered retirement plan program, RetirePath, is a Roth Individual Retirement Account (IRA) that just launched in June 2023. If Virginia’s program does not fit your needs, you can choose from a variety of alternate qualified plans.
Qualified plans include:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- A 457(b) Government Deferred Compensation plan
Washington (Seattle Only)
Seattle’s city-administered retirement program, The Seattle Retirement Savings Program, will be a Auto Individual Retirement Account (IRA). Companies, who do not want to participate in Seattle’s program can choose from a variety of alternate qualified plans.
Qualified plans include but are not limited to:
- 401(a) Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- 403(a) Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) Simplified Employee Pension (SEP) plans
- 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE 401(k) or IRA plan)
- A 457(b) Government Deferred Compensation plan
Voluntary State Retirement Plans
Massachusetts
The Massachusetts program, Massachusetts Defined Contribution CORE®, will be a multiple employer, 401(k) retirement program for non-profit organizations with 20 employees or less. While the plan is currently voluntary legislators have proposed a state-mandated retirement plan that would apply to for-profit business with 25 employees or more.
New Mexico
The New Mexico program, New Mexico Work and Save Act, will be a Roth Individual Retirement Account (IRA). The program's board will implement the plans on or before July 1, 2024
Vermont
The Vermont program, Green Mountain Secure Retirement Plan, will be will be a multiple employer, 401(k) retirement program for employers with up to 50 employees that don't currently offer a plan.
Washington
Washington's Small Business Retirement Marketplace, is a virtual hub where a variety of affordable retirement savings plans are available for purchase from qualified financial providers.
What Qualifying Retirement Plan is Right for My Company?
If you are a business looking to institute a retirement plan for your employees and this has not answered your question, we have answers to frequently asked questions for business owners like you. At Leading Retirement Solutions, we understand that offering a retirement plan to employees is not a one-size-fits-all situation. We design the plan around you, not the other way around. Let’s get started.
For tips and information regarding retirement plans, contact us.
