What is a state-sponsored retirement plan?


By The Human Interest Team

America’s retirement landscape is changing. Pensions have largely disappeared from the private sector, Social Security seems fragile, and many workers are struggling to save for retirement, especially employees at small-to-medium businesses. 

Many states have passed legislation regarding retirement plans—and have upcoming registration deadlines. It’s more important than ever to figure out what’s required of your business, as well as to find the best retirement plan for you and your employees. 

Before deciding what kind of coverage you want to offer your employees, however, it's essential to understand how state-sponsored retirement plans work and how they can benefit you and your employees. Unsure what’s going on in your state? Keep reading to find out. 

Learn more about starting a 401(k) plan for your business:

State retirement plan FAQs

Which states have passed laws? 

Since 2012, 46 states have either implemented a state-based retirement savings program, studied program options, or considered legislation. Today, there are 16 states and two cities that have either passed laws or have pending legislation that outlines new programs for private sector workers. Of that number, six states have active laws.

Learn more about other alternatives:

States with active laws & upcoming deadlines


  • Type of plan: Individual Retirement Account (Auto-IRA)

  • Deadlines: Final deadline on June 30, 2022 requires employers with 5+ employees to offer a plan (mandates for businesses with 100+ employees and 50+ employees have already passed).

  • Fines: Employers may be subject to a $250 fine per employee if found in non-compliance 90+ days after the notice and a $500 fine per employee if found in non-compliance after 180+ days. 

Learn more about CalSavers


  • Type of plan: Individual Retirement Account (Auto-IRA)

  • Deadlines: MyCTSavings opened for enrollment on April 1, 2022. Employers with 100 or more employees must register by June 30, 2022; employers with 26 to 99 employees must register by October 31, 2022.

  • Fines: There are penalties, but they are currently undefined. According to the program, "If a business falls out of compliance and fails to register, an investigation could occur and there may be penalties."

Learn more about MyCTSavings


  • Type of plan: Individual Retirement Account (Auto-IRA)

  • Deadlines: Employers with 16-24 employees must register by November 1, 2022; employers with 5-15 employees must register by November 1, 2023.

  • Fines: Employers may be subject to a $250 fine per employee for the first calendar year in which employees aren’t enrolled or don’t opt-out and $500 per employee for the second calendar year in which employees aren’t enrolled or don’t opt-out. 

Learn more about Illinois Secure Choice


Learn more about Massachusetts Defined Contribution CORE plan

New Jersey 

  • Type of plan: Individual Retirement Account (Auto-IRA)

  • Deadlines: Program is expected to launch in March 2022.

  • Fines: Employers may be subject to a written warning for the first calendar year found in non-compliance, a fine of $100 for the second calendar year in non-compliance, a fine of $250 per employee for the third and fourth calendar year, and a fine of $500 per employee for the fifth (and subsequent) calendar year. 

Learn more about New Jersey Secure Choice

New York 

  • Type of plan: Individual Retirement Account (Auto-IRA)

  • Deadlines: Employers with 10+ employees must be in compliance no later than nine months after the program is open for enrollment. As of February 2022, implementation appears to be moving forward—but final deadlines are still TBD.

  • Fines: TBD. As of early 2022, the program was in the process of naming a consultant to assist with program design, administration, investment management, and more.

Learn more about New York Secure Choice Savings


  • Type of plan: Individual Retirement Account (Auto-IRA)

  • Deadlines: Registration for employers with 4 or fewer employees is targeted for late 2022 (registration deadlines for all other businesses have passed).

  • Fines: Employers may be subject to a $100 fine per employee (up to a maximum of $5,000 per calendar year) if found in non-compliance.

Learn more about OregonSaves


  • Type of plan: Voluntary Marketplace

  • Deadlines: N/A

  • Fines: N/A

Learn more about Washington's retirement marketplace

States that have passed legislation

StateImportant dates
ColoradoProgram implementation expected October 2022
DelawareProgram implementation TBD
HawaiiProgram implementation TBD
MaineProgram implementation to begin on April 1, 2023
MarylandProgram launch on September 6, 2022
New MexicoDeadlines pushed to July 1, 2024
VermontProgram implementation TBD
VirginiaProgram implementation expected July 1, 2023

States that have introduced legislation

Arizona, Arkansas, Delaware, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, West Virginia, Wisconsin, Wyoming

Why are states creating state-sponsored retirement programs? 

In short, legislation has been introduced to encourage more private-sector businesses to offer a state retirement plan to their employees. Studies have found that people are more likely to save for retirement if their employer offers a 401(k) or some other type of retirement savings program. 

According to a National Institute on Retirement Security report from 2018, nearly 60% of working Americans lack access to a workplace retirement plan. To address the retirement savings crisis, states have implemented or proposed legislation to establish a state-sponsored retirement savings plan to help employees save. 

How do state-mandated retirement plans work? 

While these plans are commonly thought of as 401(k)s, this isn’t necessarily true. The majority of state-sponsored plans are actually Roth IRAs, which have a different set of factors to compare from a competitor offering another 401(k):

  • 401(k)s can be pre-tax, while Roth IRAs are always post-tax

  • 401(k)s have a higher annual contribution limit compared to Roth IRAs

  • In 2022, 401(k) contribution limits are $20,500 ($27,000 for those older than 50); while IRA contribution levels are $6,000 ($7,000 for those older than 50).

For more information: IRA vs Roth IRA vs 401(k): What’s the difference?

Do state-mandated retirement programs work?

Results have been mixed so far. For example, a 2021 study from the National Bureau of Economic Research found that, while OregonSaves has generated savings for more than 67,000 participants through April 2020, the average account balance was only $754. On one hand, it’s encouraging that more employees are saving. However, if this average account balance is any indication, these plans are hardly setting up individuals for their retirement years.

The reality is that increasing access to retirement benefits is undeniably a worthwhile effort. However, it’s still too early to determine if state-mandated retirement programs truly work across the board. Retirement savings is a marathon, not a sprint. That’s why the current state-run savings programs may need more time to show their true performance.

What does this mean for small businesses?

Now is the time to get ahead. For small businesses in the states with retirement legislation, now is the time to understand the program and prepare for it. Many of the start dates are still in the future, but preparing now will make for a smoother implementation and make it easier to find the best plan for your business, and simplify implementation.

Understand your options. While using the state-sponsored plan is not mandatory, in many states, businesses are legally required to offer some kind of retirement plan. The good news? There are options.

Choosing the right retirement plan

Many employers are prioritizing competitive retirement plans. Not only can starting an employer-sponsored plan come with tax benefits, but it’s also attractive to employees. Retirement benefits are central to employee loyalty, as 40% of employees say they’re a key reason to stay with an employer. Plus, 87% of workers say a 401(k) is a must-have when looking for a new job.

However, finding the best retirement savings plan for your employees isn’t easy. As an employer, you want to offer your employees tools that help them save for their future. 

How to choose the right retirement plan

Start by identifying what is most important to you and your employees. It might be…

  • The total amount that you and employees can save each year, as well as whether those contributions will come with any tax benefits.

  • The time and manual effort it takes to set up and administer the plan. Some providers offer integration with payroll providers to automate employee contributions. 

  • The cost to you, or your employees, and how those compare to the rest of the industry.

  • The level of support you and your employees desire, including help with setup and day-to-day administration, compliance, or choosing investments. 

  • Whether you and your staff seek dedicated account management and ongoing support by phone or email.

  • The specific features of the plan, like whether or not investment education is included, vesting schedules, the type of investment options you’ll be able to access, the option to offer perks like an employer match, and more. 

Read more about how to choose the best 401(k) provider for your needs.

If you’re a small business owner interested in offering a workplace retirement savings plan, it’s important to figure out what works best for you. Human Interest can help you find the latest information about state mandates. We offer affordable, customizable plans that can satisfy the mandate in your state and allow you and your employees to save more money each year.

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