The results of numerous online surveys all come to the same conclusion: the number one thing people worry about is retirement savings. Yet, it’s reported that 1 in 3 workers don’t have any money set aside for retirement.
Taking a cue from this statistic, and understanding that everyone benefits from making savings a priority, some states are proactively investing in the economic futures of their citizens by introducing laws that provide state-run retirement savings initiatives. Essentially, once the legislation is passed, it requires states to offer some type of savings vehicle and for employers with a minimum number of employees (that number varies by state) to then provide a retirement savings program for their employees. Below are the top six things you need to know about state retirement mandates:
- Mandatory, automatic enrollment with an employee opt-out: The mandates, generally speaking, are structured around a required 3% employee auto-deposit into a retirement savings account that will occur unless the employee takes action to opt out.
- Employer role: Employers will need to notify employees of their eligibility to participate, accept and retain employee decision information (opt out, or for non-standard elections) and execute employee payroll deductions and remit them to the retirement provider.
- Mandate is based on where employee works not where employer is headquartered: Oregon, Washington, California, Illinois, New Jersey, Connecticut, Massachusetts, and Maryland have already enacted legislation on the mandates. Even metropolitan cities like New York City are enacting retirement mandates. Employers will have to comply with the retirement mandate of each individual state if they have employees working in that state.
- Might not be the best fit for the business: Business owners should choose the right retirement savings program for all participants – including themselves as participant number one. The state plan design is convenient, and may fit the bill in terms of coverage and legal requirement but, ultimately, it may not work to participants’ best advantage or provide them with the retirement they envision.
- If a business already has an employee retirement benefit they are compliant: If the business already has a 401(k), SIMPLE IRA or SEP IRA plan that they offer employees then they fulfill the criteria of the state retirement mandate.
Bottom line, the business owner needs to make sure they are offering the best retirement plan for their business needs. A 401(k) plan can be similarly priced to state plans but is actually better for the employees. Using an integrated solution through BenefitMall will not only save the business owner time, but it will also give them a more robust retirement savings solution.