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State Mandated Retirement Plans: What is a Qualifying Private Plan?

November 29, 2021

As of November 2021, 10 states and 2 cities are planning to institute mandated retirement programs. While companies can choose to opt out of their respective state-mandated program, they must have a qualified retirement plan in place by certain deadlines or risk paying significant fines. 

However, if your state is not listed here, this does not mean that your employer will be exempt forever. Retirement plan mandates are gaining in popularity and are impacting more states each year. This move to increase retirement plan participation is an important step towards stabilizing the long-term financial security of those who are self-employed or are working for a company that does not already offer a retirement plan.  

The type of retirement plans that are deemed “qualified” vary from state to state. Most offer a wide range of plan options; however, some reject the use of Payroll Deduction IRAs. To help clear this up, we’ve organized and listed the states, the programs themselves, and the specific options for qualified retirement plans available. 

What is a Qualified Private Retirement Plan? 

A qualified retirement plan is a retirement plan that has met certain requirements as outlined by the IRS. Qualified retirement plans afford employees certain benefits such as tax deductions, although specific benefits vary between plans. 

There are two main types of qualified retirement plans: defined contribution plans and defined benefit plans, although defined contribution plans are far more common. 

Qualified Retirement Plans by State

California

California’s state-administered retirement plan program, Calsavers, is an Auto Individual Retirement Account (IRA). Calsavers, which is now active, allows its users to customize their investments from a variety of funds. However, companies who do not want to participate in California’s state program can choose from a variety of alternate qualified plans.

These include:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k) A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)
  • Payroll deduction IRAs with automatic enrollment

More information about the qualified plan options available for California companies is readily available should you need it. While it is important to comply with the state legislature, third party administrators such as LRS offer unique retirement plan options for your company’s specific needs.

Illinois

Illinois’ state-administered retirement plan program, Illinois Secure Choice, is a Roth Individual Retirement Account (IRA), although they have stated that other options may become available. Illinois’ program is currently up and running. Companies who operate with five or more employees must enroll either in the Illinois Secure Choice program or a plan deemed qualified by the state.

These include:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k) A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)
  • A Taft-Hartley plan

Note: qualified plans in Illinois do not include payroll deduction IRAs.

Navigating retirement plan options can be complex, and you may have many questions. If you’re curious about your retirement plan options, contact Leading Retirement Solutions.

Oregon

Oregon’s state-administered retirement plan program, OregonSaves, is a Roth Individual Retirement Account (IRA). Under the legislature, every company must offer the state-administered program or a qualified plan. Oregon has chosen to require retirement plans first to those with more employees, then progressively to smaller companies. Currently, the retirement plan mandate applies to those with five or more employees.

Qualified plans include:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b)
  • Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)

Note: qualified plans in Oregon do not include payroll deduction IRAs.

For more information about state mandated plans in Oregon, contact LRS to speak with a retirement expert.

Connecticut

Connecticut’s state-administered retirement plan program, MyCTSavings, is a Roth Individual Retirement Account (IRA). Connecticut’s retirement program has passed legislation and instituted its pilot program in October 2021. However, companies have a choice between enrolling in MyCTSavings or supplementing their enrollment with a different qualified plan.

These include:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan

Note: qualified plans in Connecticut do not include payroll deduction IRAs.

While retirement plan mandates help close the retirement savings gap, state-sponsored plans can fall short of fitting the unique needs of a business. If you’re interested in learning more about the qualified plans that fit the needs of your organization best, consider enlisting the help of a third party administrator such as LRS.

Colorado

Colorado’s state-administered retirement plan program: Colorado Secure Savings Program, will be a Roth Individual Retirement Account (IRA) funded through payroll deductions. This program was instituted along with a mandate which extends to all companies that have five or more employees. The program is expected to open to employers in 2022. Even though a retirement plan or qualifying alternative is mandatory for certain private-sector companies, there are a variety of options besides the program produced by the state.

These include:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)

Our team members can clarify any questions you may have regarding Colorado’s qualified retirement plan options. Reach out for more details.  

Maine

Maine’s state-mandated retirement program was recently signed into law this past June. Maine’s program will be a will be Roth Individual Retirement Account (IRA) funded through payroll deductions. Because the legislation passed so recently, retirement plans will not be mandated until 2023. When it is implemented, however, companies will have to choose between the state-administered program or a qualified plan.

These include:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b) Tax-sheltered Annuity planA 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)

While offering a retirement plan to employees will soon be legally mandated, it can also be the key to retaining talent. If you need help weighing which plan is best for you, our experienced team members are available.

New Jersey

New Jersey’s state-administered retirement plan program, The New Jersey Secure Choice Savings Program, established in 2019, will be a Roth Individual Retirement Account (IRA) and funded through payroll deductions once implemented. Companies, who do not want to participate in New Jersey’s program can choose from a variety of alternate qualified plans.

These qualified plans include, but are not limited to:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)

Navigating which qualified plan is right for a company can be confusing. If you have any questions about the mandate, qualified plans, or how to offer financial freedom through a retirement plan, do not hesitate to contact us.

New York (City and State)

New York City’s city-administered retirement plan program, the New York Secure Choice Savings plan, is set to be an Auto Individual Retirement Account (IRA) and funded through payroll deductions. All companies with five or more employees within the city would be required to enroll their employees in a retirement plan.

However, on October 21st 2021, additional legislature was passed which impacts the state of New York. Private sector employees throughout the entire state with at least 10 employees will now be forced to enroll in the New York Secure Choice Savings plan or another qualified plan.

Qualified plans include, but are not limited to:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)

Every qualified plan has different incentives and drawbacks. To stay informed about which plan is best for you, reach out to our team of retirement professionals.

Virginia

Virginia’s state-administered retirement plan program, Virginia Saves, will be a Roth Individual Retirement Account (IRA). The mandate associated with the retirement plan program is newer and as a result, does not have much of the specifics regarding its implementation. Because of this, it is important to institute a retirement plan as soon as the opportunity arises. If Virginia’s program does not fit your needs, you can choose from a variety of alternate qualified plans.

Qualified plans include:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)

It is important to carefully weigh your options before deciding on the retirement plan that is best for your company. At LRS, we have the capability to tailor your company’s retirement plan through a variety of non-traditional investment options. Contact us with any questions you may have.

Washington (Seattle Only)

Seattle’s city-administered retirement program, The Seattle Retirement Savings Program, will be a Roth Individual Retirement Account (IRA). Companies, who do not want to participate in Seattle’s program can choose from a variety of alternate qualified plans.

Qualified plans include but are not limited to:

  • A qualified retirement plan under Internal Revenue Code Section 401(a)
  • A 401(k)
  • A 403(a)
  • A 403(b) Tax-sheltered Annuity plan
  • A 457(b) Deferred Compensation plan
  • A 408(k), also known as a Simplified Employee Pension (SEP) plan
  • A 408(p), also known as a Savings Incentive Match plan (SIMPLE 401(k) or IRA plan)

It’s vital to comply with state legislature as well as implement a retirement plan that caters to your company’s needs. Since this can be a complex process, the retirement professionals at LRS can help guide you through the experience.

Maryland

Maryland’s state-administered retirement program, Maryland$aves, expected to open to employers in 2022, will be a Roth Individual Retirement Account (IRA). Companies that do not want to participate in Maryland’s program can choose to enroll in a different qualified plan. Unfortunately, the language used in the Maryland$aves bill is not clear when addressing other qualified plans. However, the bill directly includes:

  • A 401(k)
  • A Simplified Employee Pension (SEP) plan
  • A savings incentive match plan for employees (SIMPLE 401(k) or IRA plan)

Despite this, the bill directly states that a qualified plan will be eligible to replace the state-run program if it is a savings arrangement that complies with federal law.

Each qualified plan has different requirements and tax incentives. If you have a question about your state’s qualified plans or what innovative options Leading Retirement Solutions can provide, contact us.

What Qualifying Retirement Plan is Right for My Company?

If you are a business looking to institute a retirement plan for your employees and this has not answered your question, we have answers to frequently asked questions for business owners like you. At Leading Retirement Solutions, we understand that offering a retirement plan to employees is not a one-size-fits-all situation. We design the plan around you, not the other way around. Let’s get started.

For tips and information regarding retirement plans, contact us.

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