Although over 50 million people don’t have access to a plan through their employer, many employees want to build their retirement savings. Interestingly, a recent OnPay survey found that offering employees access to retirement savings is one of the top three perks that employers want to provide their staffers in the future.
On top of this, a growing number of states have enacted laws that require employers to offer their workers access to a savings plan once they have left the workforce. Referred to as state-sponsored retirement plans (also known as state-mandated retirement programs), these programs are gaining traction around the country.
So, how can they fit into your firm’s focus this year? In this guide, we’ll explain more about what they are, where they are already in place, and how you can use them to nurture client relationships.
Why it makes sense to discuss state mandates with clients
Position yourself as a trusted advisor
Over half of the small business owners that OnPay surveyed in their 2025 business outlook expect their accounting firm to help them with compliance-related tasks. In addition, nearly 30% of accountants have made it a 2025 goal to grow their client advisory.
The takeaway is that clients are likely to appreciate you keeping them informed, even if you’re not in a state where plans are already in effect. This shows that you are staying ahead of evolving regulations and keeping their well-being in mind.
Prevent clients from being caught off guard
Another reason to bring up this topic is that you may have clients based where offering workers access to retirement savings is part of the state’s rules. With all the to-dos that come up during the course of a day, some businesses may just be unaware that they need to pay attention to this, or have the time to keep up.
Most of the plan rules vary from state to state. Some,such as California’s, require employers with only one employee on the payroll to provide access to a private plan or the state plan CalSavers. Meanwhile, Virginia’s program RetirePath requires participation if a business has 25 or more employees. The takeaway is that proactively presenting information to clients can help prevent headaches in the long run.
Help clients prevent easily avoidable fines
No one wants to be the bearer of bad news but in some state’s where mandates are in place, shirking responsibility can lead to penalties. In Oregon, employers can either offer a private plan or OregonSaves, the state’s plan. Regardless of employee size, all employers need to have one or the other. Fines for ignoring the rules can start at $100 per employee and rise to as much as $500 per year.
Heading to the Midwest, if an employer in Illinois ignores its state mandate in the first calendar year, it could face fines of $250 per employee. During year two, penalties climb to $500 per employee. Communicating with clients can help employers avoid unwanted fees. The figures fluctuate depending on a business’s location, so it is best to check your state’s website for more information.
Client compliance checker
Want to help your clients make sure that they are staying ahead of all state rules and requirements? Try OnPay’s compliance checker in just a few clicks.
Revenue opportunities
Last year we found that over a quarter of accountants want to help SMBs with employee benefits administration. Some SMBs may be thinking of offering their employees access to retirement plans but are unsure about where to begin.
This could be an opportunity to schedule a “check-in” to discuss how savings plans work, what common 401(k)s are, and when it makes sense to stick with the state’s plan or work with a private 401(k) provider. You may find that clients are amendable to being billed as you research the pros and cons of each type of service. You can also add retirement plan setup consulting to your suite of offerings. Be sure to add a menu page to your website so that clients and prospects can review them.
Traditional 401(k)
A traditional 401(k) plan allows your client’s staffers to set aside pre-tax dollars from their paychecks, lowering their taxable income. These contributions can also be invested in stocks, bonds, and various funds, allowing them to grow tax-deferred during the employees’ working years. However, when it comes time to retire, those withdrawals will be taxed. It’s also worth noting that if a client’s employees take money out before reaching the normal retirement age, it’s likely that they will face taxes plus potential early withdrawal penalties.
— Tom Brock, CPA, CFA
Good to know
Clients should be advised that with a traditional 410(k) plan, the sponsor must pass annual nondiscrimination compliance tests to ensure that contributions do not disproportionately favor highly compensated employees. This adds administrative tasks to the workloads of human resources departments.
Safe Harbor 401(k)
This is a retirement savings plan where an employer automatically contributes a set percentage of eligible employees’ salaries to their 401(k). This allows an employer to avoid IRS nondiscrimination tests typically associated with traditional 401(k) plans. By ensuring a standard, automatic contribution across all employees, a Safe Harbor 401(k) plan mitigates the risk of compliance issues. When clients choose this plan type, they must satisfy certain notice requirements.
If each eligible employee is given written notice of their rights and obligations under the plan at least 30 days and not more than 90 days before the beginning of the plan each year, clients should have greater peace of mind.
Good to know
Organizations considering this type of plan should know that it requires mandatory employer contributions, either via a 3% nonelective contribution or a matching formula. These contributions must also vest immediately.
SIMPLE 401(k)
A SIMPLE 401(k) combines the features of a traditional plan with the ease of a SIMPLE individual retirement account (IRA). An employee may elect to defer some compensation into a retirement plan, but unlike a traditional plan, an employer must either make a matching contribution of up to 3% of the employee’s pay or a nonelective contribution of 2% of each eligible employee’s pay.
To participate, a client would have to meet the following criteria for this plan type:
- Have 100 or fewer employees
- Have no other retirement plans
- Annually file a Form 5500
— Tom Brock, CPA, CFA
Good to know
These plans are not subject to nondiscrimination tests and offer a straightforward benefit formula that makes them easier to administer.
Bottom line: Understanding mandates can lead to meaningful conversation
Proactively keeping clients informed about changing mandates such as state-required retirement programs can help accountants build relationships in more ways than one. Not only are they conversation starters, but clients are likely to appreciate the information, welcome your guidance, and, in some instances, even ask you to help them set up a retirement savings plan as part of your service offerings. As many accounting professionals are looking to build more meaningful relationships with existing clients, it can be another way to cement your firm as a trusted advisor for years to come.
