Which States Have Mandatory Retirement Plans?

Many states have implemented state-mandated retirement savings programs to address concerns about financial security in retirement. These initiatives primarily target private sector workers whose employers do not offer traditional retirement plans. Millions of Americans lack access to workplace retirement savings options, making it difficult to build a financial foundation for their later years. State-sponsored plans aim to bridge this gap, helping more individuals save for their future and potentially reduce reliance on public assistance programs.

States with Mandatory Retirement Programs

Several states have established mandatory retirement programs for private sector employees, requiring businesses that do not offer their own qualified retirement plan to participate. California operates CalSavers. Oregon has OregonSaves.

Illinois implemented Illinois Secure Choice. Connecticut offers MyCTSavings, while Colorado established the Colorado SecureSavings Program. Maryland introduced the Maryland Small Business Retirement Program, and New Jersey provides the New Jersey Secure Choice Savings Program.

Vermont has the VTSaves program, and Delaware launched Delaware EARNS. Maine has the Maine Retirement Savings Program, and Virginia offers RetirePathVA. Hawaii is also developing its Hawaii Retirement Savings Program.

Key Features of State Programs

State-mandated retirement programs generally fall into a few common structures designed to simplify saving. Many operate as auto-enrollment Individual Retirement Account (IRA) programs, where employees are automatically enrolled in either a Roth or traditional IRA unless they choose to opt out. Contributions are typically made through payroll deductions, simplifying the saving process for employees.

Some states also facilitate access to private retirement plans through a state-sponsored marketplace. This allows employers to connect with private financial institutions offering various retirement plan options, such as 401(k)s or other qualified plans. Some state programs may also offer or facilitate Multiple Employer Plans (MEPs) or Pooled Employer Plans (PEPs), which allow multiple unrelated employers to participate in a single retirement plan. These collective plans can offer economies of scale and reduced administrative burdens.

Eligibility for these state programs includes most private sector employees who do not have access to an employer-sponsored retirement plan. Contribution limits align with IRS regulations for IRAs. For 2025, the IRA contribution limit is $7,000, with an additional catch-up contribution of $1,000 for those aged 50 and over. Investment options within these programs are simplified, often including target-date funds or a selection of diversified portfolios to suit different risk tolerances.

Employer Obligations

Employers in states with mandatory retirement programs have specific responsibilities to ensure compliance. The initial step involves registering with the state program within a specified timeframe. This process establishes the employer’s account within the state’s system.

Once registered, employers facilitate employee enrollment by providing program information and setting up payroll deductions. For auto-enrollment programs, this means automatically deducting contributions from employee paychecks unless an employee opts out. Employers are responsible for accurately deducting and remitting employee contributions to the state program or designated financial institution. These remittances usually occur on a regular payroll cycle.

Ongoing reporting and compliance requirements are also part of an employer’s duties. This includes submitting employee rosters, updating employee information, and ensuring contributions are timely and accurate. Penalties may apply for non-compliance, emphasizing adherence to state regulations. Employers are exempt from participation if they already offer a qualified retirement plan, such as a 401(k), 403(b), or Simplified Employee Pension (SEP) IRA, that meets state criteria.

Employee Participation and Benefits

Employees are automatically enrolled in state-sponsored retirement programs, with the option to opt out. Once enrolled, employees can manage their accounts online, including adjusting contribution rates or selecting different investment options provided by the program. These accounts are owned by the employee, making them portable.

These plans offer significant tax advantages to employees. Contributions to a traditional IRA within these programs may be tax-deductible, leading to tax-deferred growth until withdrawal in retirement. Alternatively, Roth IRA contributions are made with after-tax dollars, allowing for tax-free withdrawals in retirement, provided certain conditions are met. This flexibility in tax treatment allows employees to choose the option that best suits their financial situation. The primary benefit for employees is the opportunity to build long-term retirement savings, particularly if their employer does not offer a traditional 401(k) or similar plan.