Throughout the country, many employees of private sector companies do not have access to an employer-sponsored retirement plan. Although individual retirement savings accounts are available, these vehicles may not provide enough of a saving incentive or contribution allowance to help someone save adequately for such a significant lifetime financial goal.
In the wake of this reality, a handful of states have begun to look closely at potential solutions. Vermont, with the passing of the Green Mountain Secure Retirement Plan, is one state making headway in the challenging retirement savings arena.
Background on Vermont’s Voluntary Retirement Plan
The Vermont Green Mountain Secure Retirement Plan was approved under Act 69 of 2017 through state legislation. The overarching Act was a broad bill, meant to adopt several economic development provisions for Vermont and its residents, including the acceptance of a state-wide multiple-employer retirement plan for private sector businesses. The Green Mountain Secure Retirement Plan is the result of more than three years of consecutive study and consultation on the feasibility of such a plan, based on statistics showing lacking retirement savings among state residents.
Recent reports highlight that workers in Vermont may be lacking access to valuable employer-sponsored retirement savings vehicles, making it far more challenging to set aside enough for a well-funded, long-term retirement. AARP estimates that up to 45 percent of Vermont’s private sector employees, about 104,000 individuals, work for an employer that offers no such retirement plan. Small to mid-sized businesses – those with fewer than 100 workers – are the most likely to fall into the category of not providing a retirement plan. The Green Mountain Secure Retirement Plan initiative is meant to help close this gap for a significant number of Vermont workers.
What is the Green Mountain Secure Retirement Plan?
Under Act 69, the Green Mountain Secure Retirement Plan was developed and approved as a state-wide public retirement savings vehicle, as a multiple-employer plan, or MEP. A multiple-employer program allows several different private sector companies to provide access to the same payroll deduction retirement savings plan, so long as specific criteria for eligibility are met. The program operates under the same federal laws and regulations as other ERISA retirement savings plans in terms of contribution limits and IRA rules on distributions.
The Green Mountain Secure Retirement Plan was designed to follow these distinct principles in implementation and operation over time:
- Simplicity for participants
- Affordability for the state and employers
- Ease of access when joining the plan
- Trustworthy oversight
- Sufficient investment options for participants
- Financial literacy assistance for employees
- Not competing with current private sector retirement plan solutions
- Portability for participants
- The ability to save using pre-tax payroll deductions
Participation Among Employers
Vermont’s public retirement plan is available to private sector companies with 50 or fewer employees that do not currently offer an employer-sponsored retirement plan to full- or part-time workers. Companies that meet these criteria may opt-in to the plan when it is available. No employer contributions to the plan are required, as the program is funded by employee contributions. However, an option for future voluntary employer contributions is built into the design of the Green Mountain Secure Retirement Plan as it stands now.
Eligibility of Employees
Any employee of a small company in Vermont that opts in to the Green Mountain Secure Retirement Plan is eligible to participate. Workers have the ability to join the program and make contributions through payroll deductions, on a pre-tax basis, up to the limits of federal retirement plan guidelines. For 2019, the total contribution limit is $19,000, with an additional $6,000 available for those over the age of 50. Self-employed individuals also have the opportunity to participate if they so choose. Both employees of participating companies and self-employed workers can opt-out of the program by withdrawing their enrollment at any time.
Timeline for Implementation
The Green Mountain Secure Retirement Plan was initially slated to begin accepting participants in January 2019. However, the board overseeing the plan design and implementation has yet to select the third-party administrator (TPA) or firm up investment selections for the plan. Per the Office of the State Treasurer in Vermont, an additional request for proposal was submitted in early spring of 2019, with a July 8, 2019 deadline for responses.
The project was intended to begin on September 17, 2019, but the Green Mountain Secure Retirement Plan is currently still in development. The state is reviewing plan details now to ensure the process for employer opt-in, employee enrollment, and investment oversight fall within the current federal guidelines for employer-sponsored retirement plans.