After many years of hard work, most people hope to enjoy a comfortable retirement. Unfortunately, over half of American households have no retirement account savings. Moreover, 32% of private sector workers need help accessing employer-sponsored retirement plans.
To address this issue, many states have started implementing state-mandated retirement plans. While these plans can help employees prepare for retirement, they present legal challenges for employers, especially those who hire employees across multiple states. One reason is how state-mandated retirement plan requirements vary notably from one state to the next.
In this article, we’ll explain how state-managed retirement plans work. We’ll also examine how business owners can comply with state laws by partnering with an experienced Professional Employer Organization (PEO) like BBSI.
Research shows that people are 15 times more likely to save for retirement if their job offers a retirement plan and 20 times more likely to save if their retirement contributions are automated.
With these statistics in mind, states have started implementing state-mandated retirement plans to encourage more people to save for retirement. These plans can close gaps among people who don’t currently have access to employer-sponsored retirement benefits.
Here are some notable features of state-mandated retirement plans:
While employers who participate in state-mandated retirement plans don’t get much say in the benefits, they still bear responsibility for managing their implementation. Employers must set up a system to ensure proper payroll deductions and educate their employees on the program’s offerings.
Many states are pushing for state-mandated retirement plans to combat the growing retirement crisis. As of 2023, 19 states have passed laws or have pending legislation about state-mandated retirement plans. Nine of those states’ laws are currently in effect.
Retirement plans have become an essential topic of discussion in recent years due to inflation and the increasing cost of living. Saving for retirement is simply more complicated than it used to be.
State-mandated retirement plans have the potential to benefit low and moderate-income earners the most. These workers often have less access to employer-sponsored benefits than their high-earning counterparts.
While state-mandated retirement plans benefit employees, the implications for employers are slightly different. Complying with state-mandated retirement requirements can present many challenges for employers, such as:
Fortunately, you don’t have to navigate retirement plans alone. A PEO, like BBSI, can handle administration and payroll for you and ensure you’re always compliant.
Many states allow employers to opt out of their state-mandated retirement plan if they offer an adequate employer-sponsored alternative. Employer-sponsored retirement plans give employers more control over the benefits they provide. For instance, employers can offer employer matching on their employees’ contributions up to a certain percentage.
These extra benefits can help companies attract and retain talented workers in a competitive job market. However, these plans often take more time and effort than their state-mandated counterparts. That’s because employers must:
As you can see, employer-sponsored retirement programs can give you more control and flexibility over your company’s retirement benefits, but this flexibility can come at a cost.
As an employer, state-mandated retirement plans can present many challenges. Most notably, you must familiarize yourself with your state’s requirements. This can be a tall order if you have employees in multiple states.
If you choose to provide an employer-sponsored retirement plan, you may not have to deal with different state requirements, but you’ll still need to ensure your alternative plan meets the exception criteria.
Keeping up with regulations across multiple states can be difficult, especially as more states adopt this type of legislation. It’s much easier to outsource this task to a pro, like BBSI. We can keep your company current on all relevant regulations and ensure your payroll and benefits are set up accordingly.
As noted above, many states have state-mandated retirement plan legislation in the works, and more states will likely follow suit. Since the landscape of state-mandated retirement plans is quickly evolving, employers need to stay on top of their states’ rules and requirements.
There’s always a possibility that the federal government will step in and mandate a national retirement program at some point. This could be advantageous for employers and employees alike. That’s because a national program would ensure:
While a federal retirement plan could benefit employers, some states may be more resistant to the idea than others, depending on their political leanings and population size.
In summary, state-mandated retirement plans are essential for many small and large enterprises.
If you need support for your company’s retirement plan, BBSI is happy to help. Whether you want to use your state’s mandated plan or offer your employees a more robust employer-sponsored alternative, we can manage everything on your behalf.
Want to learn more about our PEO services? Reach out to BBSI today.
Nine states have active state-mandated retirement plans in 2023. These states, along with their mandated retirement programs, are as follows:
Here’s a list of states that have passed mandated retirement plan legislation that has yet to take effect:
In 2023, a growing number of states are discussing state-mandated retirement plans and considering their legislative options. These states are as follows: