New State Law Requires Compliance by October 30, 2024

October 2024

What to Know and Do…
Consequences If You Don’t Respond

Background & Rationale

Virginia’s General Assembly passed legislation in 2021 that established a state-run retirement savings program…RetirePath VA. The 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 via the private market.

More in a bit about your company’s eligibility or exempt status…but first a word on what prompted the Virginia General Assembly to help private-sector workers to prepare for their financial security in retirement. 

RetirePath was created by Virginia state law to expand access to retirement savings and provide more Virginians with a path to economic security. Three retirement plan deficiencies triggered this move.

1. As a byproduct of a study commissioned by Virginia 529, more than one million Virginia workers (44%) do not have access to an employer-sponsored retirement savings plan.
2. Employer barriers to offering a retirement plan include:

• lack of resources by many small businesses to administer a retirement plan;
• relative high cost to establish plans;
• and focus on alternative employee benefits.

3. Studies have shown that workers are 20 times more likely to save for retirement when money is automatically deducted from their paychecks.

Employers That Must Register and When

Is action required for your business? For-profit and non-profit Virginia employers may be required to register for RetirePath if they:

• Have been in business for two or more years.
• Have 25 or more eligible employees.
• Don’t 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.

Note: Employers who sponsor a qualified retirement savings plan on their own are exempt from RetirePath. 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.

Here are the deadlines for employers notified to register to participate in RetirePath.

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

Previously Notified Businesses in 2023: The deadline of February 15, 2024 has passed. Immediate action is recommended to avoid the potential for non-compliance enforcement actions.

Note: Virginia law mandates all eligible employers to register for RetirePath or certify an exemption by the deadline. Failing to do so may result in penalties of up to $200 per eligible employee annually.

RetirePath VA Participating Employers…What to Expect…What to Do

A participating employer’s role is to facilitate RetirePath for their employees. There are no fees to employers, minimal administration, integrates easily with payroll systems and requires no matching of employee contributions. 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 you’ve registered for RetirePath, here are details of next steps including information that you may want to announce to your employees.

Note: Self-employed individuals may register for RetirePath. You will need to demonstrate taxable income that’s subject to payroll deductions.

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 VA employer. Employees are automatically enrolled in the savings program within 30 days of joining a business 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:

• participate in the program,
• elect how much to contribute,
• and 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. Generally 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. Click here for more information on contribution limits permitted by the IRS.
• 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%.
• 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.
• Employees retain their retirement savings if they change jobs.

The foregoing is meant as an overview only. Give us a call with any questions.