State Law to Require Businesses with 25-Plus Employees to Offer a Workplace Retirement Program, RetirePath Virginia

With only 44 percent of employees in the private sector lacking access to a workplace retirement program in Virginia, according to the American Association of Retired Persons (AARP)¹, the state legislature took action to help improve the coverage gap. The signing of HB 2174 into law by Gov. Ralph Northam in April 2021 established VirginiaSAVES, recently renamed RetirePath Virginia, that would give many of these individuals an opportunity to participate.

Details on Virginia’s state-mandated retirement program

The United States has a growing retirement problem that must be addressed, with a report showing households with individuals nearing retirement having a median retirement account balance of $14,500². Nearly 800,000 employees could benefit from participation in RetirePath Virginia, according to AARP.

Administration and development of the program lies with the Virginia College Savings Plan board, which also runs the state’s 529 program.

What Employers Should Know About RetirePath Virginia

Participation is mandatory for businesses who:

• Have been in operation for at least two years
• Had 25 or more employees in the previous calendar year
• Do not already offer a qualified retirement plan to employees

A qualified retirement plan includes a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b).

The law also stipulates that employers eligible to participate includes self-employed individuals, sole proprietors, non-governmental businesses or other enterprises, whether for-profit or not-for-profit.

Employers will automatically enroll eligible employees — anyone at least 18 years of age who is employed at least 30 hours per week and receives taxable wages in Virginia — but employees can opt out. Part-time employees (those who work fewer than 30 hours a week) are not eligible.

There is a default contribution amount of 5% per pay period with an annual auto-escalation of 1%, up to a maximum of 10%.

Employers cannot contribute to the program such as matching funds.

What are Compliance Obligations for Employers Under RetirePath Virginia?

Similar to some of the currently active state-mandated programs, employer involvement is minimal with RetirePath Virginia, but there are certain requirements necessary to stay compliant. Businesses must:

• Businesses had until Feb. 15, 2024, to register or offer a qualified option that satisfies the mandate; all new businesses have until Oct. 30 of the year after meeting the employer requirements to register.
• Set up payroll deduction for employees (the percentage of wages allocated per pay period has yet to be determined)
• Hold an annual open enrollment period
• There is a penalty of $200 per employee annually for noncompliance

Looking forward

Businesses should stay up-to-date on state retirement plans to remain current with relevant changes. Additionally, businesses don’t have to use RetirePath Virginia. Instead, consider establishing a retirement plan such as a 401(k) or even a Pooled Employer Plan through a provider such as Paychex to satisfy the mandate.

¹Feasibility Study of Retirement Savings Programs for Virginia (HJR 103), 2018

²National Institute of Retirement Savings, “The Continuing Retirement Savings Crisis”