Virginia’s General Assembly has passed a bill that would create a state-facilitated individual retirement account (IRA) savings program for employees of companies that don’t offer a retirement plan. The bill is now headed to the desk of Gov. Ralph Northam, who is expected to sign it into law.
The so-called VirginiaSaves program directs the governing board of the Virginia529 College Savings Plan, an independent state agency, to establish an automatic enrollment payroll deduction IRA savings program. The board would administer the program and develop requirements, procedures, and guidelines for it, such as default contribution rates, procedures for enrollment and withdrawal, and procedures for noncompliance. The board would also determine how the funds for the program will be invested.
Under the program, eligible employers—whose participation would be mandatory—are defined as self-employed individuals, sole proprietors, and nongovernmental employers having 25 or more employees that do not offer a qualified retirement plan. Eligible employees, defined as an individual employed by an eligible employer, would be automatically enrolled unless they choose to opt out.
“Approximately 45% of Virginia’s workforce does not have access to a retirement savings plan at work,” Delegate Luke Torian, D-Prince William, sponsor of the bill, said in a statement. “VirginiaSaves will afford workers a retirement savings vehicle at no cost and no liability to private employers.”
The bill contains provisions limiting the liability of the board and the commonwealth, which would have no obligations or liability to any party for the payment of any retirement savings benefits accrued by individuals under the program.
Participating employers would also not be liable for an employee’s decision to participate in or opt out of the plan, would not be required to be a fiduciary over the program, and would not have liability or responsibility related to the operation of the program. Once signed into law, enrollment in the program would start no later than July 1, 2023.
Virginia is just one of several states moving to create state-run retirement plans. Most recently, Oklahoma lawmakers proposed the Oklahoma Prosperity Act, which would create a state-run retirement plan using an auto-enrollment payroll deduction IRA, similar to VirginiaSaves.
And last month, a task force headed by Wisconsin’s state treasurer recommended establishing a state-run program that provides a retirement benefit plan for employers that don’t provide one. Meanwhile, California, Colorado, Connecticut, Illinois, Maryland, New Jersey, and Oregon have already adopted auto-IRA programs.