As a growing number of states consider and enact legislation requiring that employers offer a retirement savings plan to employees, understanding where things stand in your state can help you avoid costly fines and headaches.
While these programs are a step in the right direction in terms of expanding access to retirement savings options, these state-sponsored programs have some notable limitations, especially if you own a business:
- Owners, along with employees earning more than $144,000, may not be eligible to participate.
- Possibility of administrative complexities if employees are in multiple states that are subject to mandates.
- The maximum annual contribution for these state-run programs is $6,000 in 2022 ($7,000 if age 50 or older). In a 401(k), participants can contribute up to $20,500 ($27,000 if 50 or older).
- Opting to offer a state-run program could mean losing out on up to $16,500 in tax credits available for starting a qualified plan.
- Employer contributions are not permitted.