Virginia has joined in on the growing trend of implementing a state-mandated retirement program with the new RetirePath Virginia program that goes into effect on July 1, 2023. Created by Virginia state law in an effort to bridge the retirement savings gap, covered employers will soon be required to provide a workplace retirement program to all eligible employees. With the effective date approaching quickly, qualifying businesses should begin preparing now to work toward compliance. Below is an overview of the key aspects that businesses should be aware of.
Who are the covered employers?
RetirePath Virginia applies to nongovernmental employers that:
(i) Have 25 or more employees;
(ii) Have been in operation for at least two years; and
(iii) Do not already offer a qualified retirement plan such as a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b)).
Self-employed individuals, sole proprietors, and other non-governmental businesses or other enterprises, whether for-profit or not-for-profit may enroll in RetirePath Virginia if they so choose.
Which employees does it apply to?
RetirePath Virginia applies to employees who:
(i) Are at least 18 years of age or older;
(ii) Work a minimum of 30 hours per week; and
(iii) Are receiving wages.
Exclusions. RetirePath Virginia does not apply to
part-time employees. Additionally, qualified employees may choose
to opt out of the RetirePath program at any time.
What are the contributions?
RetirePath Virginia has a default contribution amount of 5% per pay period with an annual auto-escalation of 1%, up to a maximum of 10% per pay period. Employers cannot contribute to the program such as traditional matching funds.
There are no employer fees or fiduciary liabilities under RetirePath Virginia.
How do employers comply with RetirePath?
Covered businesses must register with RetirePath Virginia by July 1, 2023, or, in the alternative, offer a qualified retirement plan in lieu of registering with RetirePath. Regardless, employers must set up payroll deductions for their covered employees. The percentage of wages allocated per pay period has not been determined yet.
Employers who do not comply with the above requirements will be subject to a penalty of $200 per covered employee per year until compliance is met.
What should employers do to prepare?
To begin preparing, covered entities should start by assessing their current retirement plan offerings, if any, and which employees are covered under RetirePath Virginia. Other actions that employers should take include:
- Informing covered employees of this program and their ability to opt-out if they so choose;
- Prepare payroll departments of deductions that will apply to covered employees who choose to opt into RetirePath Virginia;
- Schedule open enrollment for covered employees who wish to opt into RetirePath Virginia.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.