The deadline for logging onto the website and either registering or receiving an exemption is February, 2024.
On July 1st, Virginia became the latest state to go live with its state sponsored, mandatory retirement plan. The plan is mandatory for companies that have more than 25 eligible employees, have been in business for two years or more, and do not offer a company retirement plan. We will lead you through some common questions and answers below.
Currently, the website does not allow registration or certifying your exemption without the Access Code. There is no information at this time about how to get a code if one does not come to you.
There is no monetary cost to the employer (employees are charged $27 per year) but there is sure to be some internal cost of administration: adding employees, removing employees, educating employees, and uploading payroll contributions as these functions will all require administrative time.
One of the biggest pain points with the State plan is that it is an Opt-Out plan. That means your new employees are automatically enrolled, and at a 5% contribution rate. The employer can’t Opt-Out – the employee must do it themselves. We foresee all kinds of unhappy employees when they see 5% of their gross pay has gone to a retirement account in which they have no interest. On top of that, every year the automatic salary reduction increases by another 1%, until 10% is deferred from the employee’s paycheck.
As discussed earlier, employers will spend administrative time managing their employee roster on the state website as employees are hired and terminated, as well as uploading payroll contributions. We feel the biggest headache will be the constant employee education and support, especially with the auto-enrollment feature.
No, the plan is actually an after-tax Roth IRA (we used State 401k in this Article’s title to play on the 411, but it is not a 401k.)
There are penalties of $200 per employee per year for not participating in the State plan if your company is required to do so.
Disclaimer: As always on our blog, the information shared here is general in nature, and is not specific advice. Moreover, the information, rules, or programs spotlighted may change at any time, and the contents of this article may not be updated. Please consult with your tax advisor, HR consultant, or business attorney for advice on your company’s specific situation.