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RetirePath Virginia helps private-sector workers who do not have access to a retirement savings plan save money that they can use as income when they retire. But, as a Virginia employer, how do you know if you are required to participate, and what should you do if you already offer your employees access to a retirement savings plan like a 401(k)?
In this guide for business owners, we’ll discuss when RetirePath Virginia became law, who is required to offer it, and how eligible employees can contribute.
Why are state-sponsored plans like RetirePath Virginia gaining traction?
There are a couple of different reasons why employer-sponsored retirement plans are picking up steam in several regions across the US. On one hand, with food and fuel prices rising, Americans working in the private sector are struggling to pay for their basic needs, much less affording to sock away retirement savings for post-work life.
Building up savings at the state level is also becoming a challenge for private workers in Virginia. In particular, a study commissioned by Virginia529, an agency that was originally authorized by Virginia’s General Assembly to develop a program to help people save for rising higher education costs, found some unsettling news: more than one million workers in the state of Virginia do not have access to a retirement savings plan at work.
State-facilitated retirement savings programs like RetirePath Virginia have been popping up throughout the US. Other states that have plans in place include Colorado, New York, California, and Connecticut, to name a few. You can use our guide to state-mandated retirement plans to see all of the areas where they have been introduced and other locations where they have been proposed.
Now, let’s get into the specifics of what this state-sponsored retirement program offers to employees in Virginia.
What is RetirePath? Get familiar with Virginia’s state-sponsored retirement plan
In 2021, the Virginia General Assembly passed legislation establishing a retirement savings program. See the legislation.
What does this mean? In June 2023, Virginia became the most recent state to offer a state-sponsored retirement plan.
- Eligible employers with 25 or more employees that have been in business for at least two years, must provide their workers access to a qualified plan that provides an opportunity to save money
- Employers may choose an independent retirement plan, a retirement plan administrator, or offer the state-facilitated program, RetirePath Virginia. By law they are required to offer one of these options.
There are no employer fees or fiduciary responsibilities for employers. That said, the plan does regularly deduct a small fee from participating employees’ accounts, which is used to cover the cost of plan administration, investment options, and other operating expenses.
What if you already offer employees access to a qualified plan?
For organizations that already have a plan in place, you can use an access code that the state of Virginia provides to apply for an exemption. Here’s more information from the RetirePath help center on applying for an exemption.
Are you a self-employed individual that’s interested in participating? RetirePath can work for you. Just keep in mind that you’ll need to have taxable income that’s subject to payroll deductions.
Do employers risk penalties if they don’t comply?
Yes, there can be penalties. Businesses that fail to respond before the registration deadline may face an annual penalty of up to $200 per eligible employee, according to the RetirePath’s website’s frequently asked questions section.
How do you know if your employees are eligible for RetirePath Virginia?
Eligible employees are categorized as employees that are 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.
If you have any members on staff that fit these criteria, it is likely that these workers meet the eligibility requirements and can participate.
How do employees save using RetirePath?
For employees that wish to participate in RetirePath Virginia’s savings plan, they’ll want to know that they will be accumulating savings using a Roth Individual Retirement Account (IRA).
- Employees contribute to the plan using after-tax payroll deductions, which employers set up
- The default savings rate for a RetirePath Virginia account is 5% of your total pay. It’s deducted from your paycheck after taxes have been taken out
- When they join a business that offers RetirePath, eligible employees are automatically enrolled in the program within the first 30 days on the job. That said, participation is voluntary, and if they choose, a worker may opt out of the plan and re-enroll anytime.
Should an employee want to, they are able to change contributions to a traditional IRA.
Here are contribution limits that employees may want to keep in mind, per the IRS.
More resources about RetirePath Virginia for employers
- Program description
- Employer help portal
- Quiz to help you figure out if RetirePath is right for your company
- Employer FAQs about the program
- Assets to communicate to how RetirePath works for employees
If you still have questions, you can always contact their customer service team in Virginia. Here are some of the options to do this:
- Call their office by phone: For employer assistance call 833-608-6281; for employee/saver assistance, call 833-608-6776 (their normal hours are Monday through Friday, 9:00 am to 8:00 pm ET)
- Contact their team by email using the form on the Contact page
Retirement plan access can benefit employers and employees
When employers give their workers a way to save for retirement, there can be benefits for everyone. On the one hand, it provides employees with an opportunity to save money that can be used as income for expenses when they retire. For employers, offering a savings plan can improve employee morale, increase productivity, and prevent top talent from looking to see if the grass is greener with another company.