LAST REVIEWED Jan 04 2022 6 MIN READ
By The Human Interest Team
Throughout the country, many employees of private sector companies do not have access to an employer-sponsored retirement plan. Although individual retirement accounts (IRAs) are available, these savings vehicles may not provide enough of an incentive or contribution allowance to help someone save for such a significant lifetime financial goal.
In the wake of this reality, a handful of states have begun to introduce and implement state-sponsored retirement plans. Vermont, with the passing of the Green Mountain Secure Retirement Plan, is one state making headway in the challenging retirement savings arena. Unlike many states that provide employers a way to set up an IRA for eligible employees, however, Vermont’s plan was approved as a state-wide multiple-employer retirement plan (MEP). And when approved, the plan is slated to be voluntary for employers.
The Green Mountain Secure Retirement Plan was originally supposed to launch in January 2019, but implementation was postponed by the state. And while the Vermont Treasurer’s office stated it hoped to launch the program in 2021, there have been no further developments.
Here’s what else you need to know about plan design and upcoming dates.
Background on Vermont’s voluntary retirement plan
Workers in Vermont may 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. In fact, AARP estimates that up to 45 percent of Vermont’s private sector employees (about 104,000 individuals) work for an employer that doesn’t offer a retirement plan. Small- to mid-sized businesses are more likely not to provide a retirement plan. According to the Bureau of Labor Statistics, 87% of businesses with 100 workers or more have access to retirement benefits. That number drops to 58% for those with fewer than 100 workers.
The Vermont Green Mountain Secure Retirement Plan was approved under S.135 Act 69 in 2017. 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 MEP for private sector businesses. The Green Mountain Secure Retirement Plan was the result of more than three years of consecutive study and consultation on the feasibility of such a plan, based on statistics showing a lack of retirement savings among state residents.
What is the Green Mountain Secure Retirement Plan?
The Green Mountain Secure Retirement Plan was developed and approved as a state-wide public retirement savings vehicle as a MEP. A MEP 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
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
Low-cost 401(k) with transparent pricing
Sign up for an affordable and easy-to-manage 401(k).
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 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 2022, the total contribution limit is $20,500 ($19,500 in 2021), with an additional $6,500 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 the Green Mountain Secure Retirement Plan
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 finalize 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 state put implementation on hold after a U.S. Department of Labor (DOL) proposed rule regarding the definition of “employer” under ERISA threatened states’ ability to implement MEPs. Vermont and other states urged the DOL to clarify that the proposed rule did not impact state plans like the Green Mountain Secure Retirement Plan, which it did in 2019. After reissuing a request for proposals for a third-party administrator and fiduciary services, the state executed a contract with TAG Resources, LLC, in late 2020.
In a January 2021 update, the Vermont Treasurer’s office stated that it hoped to launch the program early that year, but there have been no further updates.
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Learn if starting a plan comes with tax incentives.
Your options as a Vermont small business owner
It’s important to keep your ear to the ground to track further developments (Human Interest will keep you updated!). While the Green Mountain Secure Retirement Plan is designed to be optional for employers, it’s important to note that access to an employer-sponsored retirement plan is the number one reason why SMB employees start saving for retirement. And the Green Mountain Secure Retirement Plan isn’t your only option as a Vermont business owner.
A modern 401(k) plan from Human Interest can help small businesses offer an affordable, flexible retirement benefit to their employees. By syncing to more than 100 payroll providers, and handling recordkeeping and compliance, we help reduce the manual work of plan administration—so you can focus on running your business. Click here to get started today.
The Human Interest Team
We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.