What to know about VTSaves: Vermont’s state retirement plan

It’s no secret that many Americans aren’t prepared for retirement. That’s in great part due to the fact that “over 80% of Americans earning less than $50,000 lack access to workplace retirement savings,” according to AARP Public Policy Institute. Adding to the growing list of retirement plans sponsored by individual states across the country, legislation establishing VTSaves (S-135) was signed into law in June 2023 by Governor Phil Scott. 

Vermont passed retirement legislation in 2017, when it authorized the Green Mountain Secure Retirement Plan. That program was designed to establish a state-wide MEP (multiple employer plan)—but was never implemented. With the Green Mountain plan stalled, State Treasurer Mike Pieciak introduced legislation for VTSaves in March 2023. It quickly passed through Vermont’s Senate and the House.

As planned, VTSaves will be rolled out in phases for employers starting in 2025. Eligible employees will be auto-enrolled in a Roth IRA program, with the option to opt out. Here’s what else we know about the retirement plan.

Background on VTSaves legislation

Many workers in Vermont lack access to valuable employer-sponsored retirement savings vehicles, making it far more challenging to set aside enough for a well-funded, long-term retirement. “Having access to payroll deduction makes people 15 times more likely to save, yet over 88,000 Vermont workers can’t save for retirement out of their regular paycheck,” according to Greg Marchildon, State Director for AARP Vermont. 

Pieciak claims the program will “transform the long-term financial well-being of tens of thousands of Vermonters,” noting that Vermonters who currently do not have access to retirement plans are: 

• Lower-earning 

• Younger 

• Less educated 

• More likely to be BIPOC 

• More likely to be female

Who is required to offer VTSaves?

VTSaves establishes a retirement plan with a Roth IRA option rather than an MEP, and makes the plans mandatory for covered employers. A covered employer is a person, entity, or subsidiary in the State engaged in a business, industry, profession, trade, or other enterprise, whether for profit or not for profit. 

Covered employers must offer a tax-favored retirement plan—or be part of a control group that contributes to such a plan—within the current calendar year or two preceding calendar years.

Learn more about Vermont's Green Mountain Secure Retirement Plan alternatives:

• Use our calculator to see how much a 401(k) would cost with SECURE Act tax credits applied.

• Read more about the fees associated with launching and maintaining a 401(k) plan for your business.

• Read our guide on setting up a small business 401(k).

VTSaves plan details

VTSaves will require covered employers to auto-enroll eligible employees into a Roth IRA account with an initial payroll deduction contribution rate of 5%, applying an annual increase of 1% up to the cap of 8% of the employee’s salary. Employees will be able to:

• Adjust their contribution rates

• Choose from a range of investments

• Roll over the funds in their accounts into other IRAs or other retirement accounts

• Opt out of the program.

VTSaves was modeled after programs in states like Oregon and California. In those states, individuals, on average, have saved up to $2,000 annually toward retirement. 

What employers need to know about the VTSaves retirement plan

As planned, employers with more than five employees that do not already have a workplace retirement plan will be required to sign up. The program will be phased in on the following schedule, based on how many eligible workers covered employers have. 

Eligible employees must be auto-enrolled by the following dates:

The Treasurer’s Office of Vermont plans to hire a Director of VTSaves, who will work with businesses in implementing the program. 

Your options as a Vermont small business owner

It’s important to keep your ear to the ground to track further VTSaves developments (Human Interest can help!). While the state-sponsored program is mandatory for those businesses that don’t already offer a retirement plan, it’s important to know that the VTSaves plan isn’t the only option for Vermont business owners. 

A modern 401(k) plan from Human Interest can help small businesses offer an affordable, flexible retirement benefit to their employees. Access to an employer-sponsored retirement plan is the number one reason why SMB employees start saving for retirement, and a good plan can boost recruitment and retention. Click here to get started today.