RetirePath Virginia's Mandatory Retirement Program

By now, more than 8,000 Virginia employers will have received notification regarding Virginia's state-sponsored retirement program - RetirePath. The law creating the program went into effect July 1, 2021 and required employer registration open in 2023. 

RetirePath Virginia is a program that offers employers access to an automatic enrollment, state-facilitated, individual retirement account (IRA) for employees. 

RetirePath was created to address Virginia workers' low saving rate. Over 40% of the Virginia workforce does not have access to a retirement savings plan at work. As we know, the sooner an employee starts saving, the larger their retirement nest egg will be. Offering a means for employees to start saving for retirement now was a driving force behind the mandate in Virginia. Studies have shown, automatic enrollment* increases the likelihood participants will contribute to an employer-sponsored plan. 

*Automatic Enrollment means that a predetermined percentage of compensation will be deducted from employee pay automatically once that employee meets the eligibility requirements. While the employee always has the option to change the deduction amount (even down to 0%), the automatic enrollment feature encourages participation, barring any negative election on the part of the employee. Learn more here on the benefits of automatic enrollment and escalation.

Employer and Employee Eligibility and Enrollment

Eligible employers are required to register with the program before February 15, 2024 to avoid the $200 per employee fine. If not registering, Virginia employers in the private sector can opt out if they meet an approved exemption.

Eligible Employers

  • Employed 25 or more eligible employees during 2023,
  • In operation for two years or more, and
  • Do not already offer a qualified retirement plan (401(k), 403(b), etc.)

If you are still unsure whether your an eligible employer or not, take the RetirePath Eligibility Quiz. Requirements may also be found here.

Eligible Employees

  • At least of age 18,
  • Employed and scheduled to work 30 hours a week, and
  • received wages in Virginia.

Currently, Eligible Employers in Virginia have 3 options:

Option 1:  Implement a qualified retirement plan, such as a 401(k).

Option 2:  Register with RetirePath Virginia by February 15, 2024.

Option 3:  Pay the fine that is up to $200 per employee per year

The fine associated with not offering any program is almost 3X what a typical 401(k) plan would cost per year for a company with 30 employees.

Tax Credits for starting a new plan are available to employers.
When you consider the potential qualified tax credits, which can aid in off-setting the cost of a new plan over 3 years, employers pay even less. Knowing your options is one step towards deciding what is best for you and your employees. We encourage you to connect with us to learn more about available alternatives that have far more flexibility and options for employers. 

RetirePath Quick FAQs

What Type of Saving Plan Is This?
The program providers employers with a means to offer Roth IRAs to their employees. Automatic Enrollment defaults the election to Roth but employees can recharacterize their contributions to a traditional IRA. 

How much can an employee contribute?
Contribution limits are set and adjusted annually by the federal government. We list contributions limit amounts online and update when they change. The current IRA limit is $6,500 per year if under age 50 ($7,500 if age 50 or older), so long as an employee has Virginia earnings of at least $6,500.

What investment options are there?
Contributions will be invested in a default investment option, unless the participant selects an alternative investment offering.

Alternatives for Virginia Employers

401(k) Plans Qualify Virginia Employers to be Exempt from the RetirePath IRA Program
According to RetirePath, "RetirePath is not meant to replace or compete with employer-sponsored plans, which have advantages. For example, 401(k) plans have higher contribution limits and allow for employer match contributions, unlike RetirePath." 

If Virginia's IRA program does not seem like the right fit for you or your employees, you have alternatives - including, starting a 401(k). After all, there are several key differences between IRAs, like RetirePath, and your own employer-sponsored 401(k) plan:

1. 401(k) plans allow for employer contributions, and IRA contains only employee contributions;
2. 401(k) plans have higher contribution limits: for 2023 an employee participating in an employer-sponsored 401(k) may contribute $22,500 ($30,000 if age 50 or older).

Offering employees with a way to save for their retirement is a win for everyone. Programs like RetirePath in Virginia, and others across the country, are an excellent option in lieu of a qualified plan, like a 401(k). As notices of the program are received, employers that need help reviewing the alternatives are welcome to reach out to us at any time. Determining the best possible solution for themselves, their company, and their employees, is paramount and not all options are equal.