State Law Concerning Retirement Savings Program Requires Compliance by October 30, 2024

Virginia passed a law in 2021 that established a state-run retirement savings program known as RetirePath Virginia (or just “RetirePath”). New rules went into effect in June 2023 mandating that eligible employers participate in the plan or provide their employees with a qualified retirement savings plan initiated through the private market.  In short, RetirePath was created to expand access to retirement savings and provide more Virginians with a path to economic security in retirement.

This new compliance requirement applies to both for-profit and nonprofit employers in Virginia, who may now be required to register for RetirePath if they:

• Have been in business for two or more years.
• Have 25 or more eligible employees.
• Do not already sponsor a qualified retirement savings program such as a 401(k), 403(b), or Simple IRA.

RetirePath will contact employers who meet these criteria to communicate their registration deadline.

Again, employers who sponsor a qualified retirement savings plan on their own are exempt from the RetirePath registration requirement. Exemption may be certified online using the access code provided to them by the state.

To find out if your business is eligible, you may take an Employer Eligibility Quiz online. If you choose to apply for an exemption, click here.

The deadlines for employers notified to register to participate in RetirePath are:

Newly Eligible Businesses:  Businesses eligible in 2024, the deadline is October 30, 2024.

Previously Notified Businesses in 2023: The original deadline of February 15, 2024 has passed. Immediate action is recommended to avoid the risk of a non-compliance enforcement action or imposition of penalties. Virginia law mandates all eligible employers to register for RetirePath or certify an exemption by the applicable deadline. Failing to do so may result in penalties of up to $200 per eligible employee annually.

A participating employer’s role is to facilitate RetirePath for their employees. There are no fees to employers, minimal administration, easy integration with payroll systems and no matching of employee contributions is required. To register, employers will need their employer identification number (EIN) and RetirePath Access Code. After enrollment, employers must submit payroll records each pay period.

Once an employer has registered for RetirePath, suggested next steps include:

• Eligible employees are those 18 years of age or older, earning income in Virginia, and employed at least 30 hours for any portion of a week in the preceding 12 months and earn taxable wages from a Virginia employer. Employees are automatically enrolled in the savings program within 30 days of joining a company that is registered for the program. Their participation is voluntary, so they may opt out and re-enroll anytime.

• Employees of registering employers will receive information directly from RetirePath. They’ll have the option to: (i) participate in the program, (ii) elect how much to contribute, and (iii) choose the option to elect a traditional, tax deductible IRA for their contributions.

Employee contributions are to a Roth Individual Retirement Account (IRA) via after-tax payroll deductions processed by their employer. Earnings are credited to the account tax free. As a general matter, distributions at retirement are tax free as well.

Employees may make changes to their investment selections at any time. If no action is taken, the savings plan will default to the following:

• Contributions will go into a Roth individual retirement account (IRA) with the option to elect a traditional IRA.

• The default automatic contribution rate is 5% of the employee’s pay credited to the employee’s account, subject to change by the employee. Unless the employee chooses otherwise, the rate will increase by 1% annually up to 10%.

As noted above, employers are not required nor permitted to contribute.  Investments will be administered by private-sector financial firms and managed by Virginia529. RetirePath regularly deducts a small fee from the accounts of participating employees to cover the cost of administration, investment options and other operating expenses. There are no fees charged to employers. Also, Employees retain their retirement savings if they change jobs.

Be sure to check with your employee benefits provider or your accountant with any questions about this compliance requirement.