Auto-IRA’s: How they work and what actions may be required from you as an employer (covers multi-state)
For those employers that do not currently have any type of retirement program in place, you may soon be required to set up an Auto-IRA through the state you have employees in. An Auto-IRA essentially requires employers to automatically enroll its employees into an Individual Retirement Account at a specific percentage so the employee may start saving towards their retirement. The employee may opt-out, but they are auto-enrolled if they do not take any action. At this time, 14 states have passed laws that will soon mandate employers to participate in a state-administered program. Of the 14 states, 3 states have already launched their program and as a small employer you may soon be required to take action as well. Though each state’s program will look a little different, it is expected that none of the states’ programs will cost additional fees to the employer. There will however be some administration involved.
Both California and Oregon will require small employers to participate in the program starting sometime in 2022. In California, employers that have 5 or more employees and do not offer a retirement savings program will be required to set up their account with CalSavers by June 30th, 2022. In Oregon, the deadline has not been announced yet but it is targeted for late 2022, Oregon will however require employers of all sizes to participate in the auto-IRA program through OregonSaves. The third state that has an auto-IRA program in place is Illinois, however at this time they do not require employers with fewer than 25 employees (all located in the state of Illinois) to participate in the state’s program.
New York, Virginia and Maine are amongst the 14 states that have passed laws and are actively working on establishing auto-IRA programs. At this time however there is not sufficient information on what the program will look like and when employers need to sign up.
For those clients that TABS manages the US payroll for, you will be informed if and when any requirements apply to your business. For our HR Management clients, we will be setting up and administering the program for you. For more information, please don’t hesitate to reach out to your HR representative at TABS.