According to a study authorized by the state legislature, less than half of Virginia’s workers do not have access to a company-sponsored retirement plan. In response to these findings, the state has taken bold action to remedy this savings gap and help their residents pay for retirement with a new state program: RetirePath Virginia. RetirePath Virginia is a program designed to help Virginian workers save for retirement and enjoy their golden years with minimal financial stress.
In this article, we'll answer some questions you may have regarding RetirePath Virginia, including relevant deadlines, who it affects, what it does, and much more. Let’s dive in!
Scheduled to be launched on or before July 1, 2023, RetirePath Virginia is an automatic-enrollment, paycheck-deduction IRA. As a statewide program, RetirePath Virginia aims to increase overall retirement savings and financial health across the state, from the busy streets of Richmond to the Shenandoah Valley. Additionally, employers who are covered by this mandate will be required to offer RetirePath Virginia or another qualified retirement program to their employees.
RetirePath Virginia is run through Virginia529, an independent, self-sustaining agency of the Commonwealth of Virginia. The new program will allow employees to save for retirement through automatic payroll deductions or direct contributions through a linked bank account. However, as with all payroll deduction IRAs, employers are prohibited from making contributions to their employee’s plans, such as offering matched savings.
Employees are not locked into a fixed contribution schedule, and can stop or change their contributions at any time. Additionally, contributions to a RetirePath Virginia account are made with after-tax dollars, which means employees don't have qualified Roth IRA withdrawals.
If your business falls under the criteria below, then you are subject to the RetirePath Virginia program:
Employers who meet these criteria are required to offer their employees the ability to save through RetirePath Virginia.
If your business has 25 or more employees, has been in business for at least two years, and isn’t yet sponsoring a plan, there are several qualified plans you can offer instead of RetirePath Virginia:
It's important to choose the best option for your employees and business. An ideal plan should meet the needs of both your workers and your company.
As of this time, there is not yet an exact timetable for the rollout of RetirePath Virginia. Scheduled to be launched on or before July 1, 2023, employers are encouraged to check the Virginia529 website for updates and to sign up when the program has been finalized and launched, to avoid any potential penalties.
Any Virginia resident who is employed, self-employed, or a member of a partnership is eligible to enroll in the RetirePath Virginia program. Additionally, residents must also be at least 18 years old and receive an income in order to participate. Individuals who are self-employed, sole proprietors, or who run non-profit enterprises are also eligible to enroll in the VirginiaSaves retirement savings program.
Remember, the program is both voluntary and flexible, meaning employees are not required to participate in the program if they do not want to.
As mentioned above, the program is yet to be rolled out, with a tentative launch date of July 1, 2023. Once registration deadlines are in place, non-compliance with RetirePath Virginia may result in penalties, though these have not yet been determined.
While RetirePath Virginia may be the preferred retirement savings program in the state for some employers, there are other options available that may benefit your employees more. One viable alternative is the 401(k) plan.
Vestwell, who is partnering with the state to administer RetirePath Virginia, makes it easy for small businesses to offer best-in-class retirement benefits to their employees. A 401(k) allows workers to save money for retirement on a tax-deferred basis, lowering an employees’ taxable income for the year in which they contributed. These plans also offer higher contribution limits than other retirement savings options.
Employers can save on administrative costs with a 401(k) plan, potentially qualify for up to $16,500 in tax credits, and employees can choose the investment vehicles that best fit their needs.
Vestwell is a digital retirement platform that helps employers offer and administer company-sponsored 401(k) or 403(b) plans and helps employees save for retirement. We strive to make saving for retirement easy, accessible, and efficient for everyone.
Though retirement plans are a great way to save money for retirement, many people do not have access to employer-sponsored retirement plans such as 401(k)s. Fortunately, RetirePath Virginia is an important step forward in closing the savings gap and helping Virginians of all ages prepare for retirement.
However, a company-sponsored plan may be the best option for your small business. Vestwell’s digital retirement plan platform that makes it easier for you to offer and administer a company-sponsored 401(k) or 403(b). By combining technology with best-in-class retirement plans and user-first design, Vestwell offers a wide range of services to small businesses everywhere.
If you are a Virginia employer interested in setting up a 401(k) account for your business, you can contact Vestwell to determine if you are eligible to receive up to $16,500 in tax credits, which can help cancel out administration costs.