VIRGINIA EMPLOYERS … RetirePath Deadline: February 15, 2024

Employer Mandates … Employee Options

What is RetirePath? 

In 2020, a report by Virginia’s Legislative Information System to the General Assembly alerted lawmakers to a major employee financial shortcoming … about 45% of private-sector workers in Virginia lack access to a retirement plan through their job.

That fact prompted legislative action to propose and pass a solution, HB 2174 … a remedy referred to as RetirePath. The law went into effect July 1, 2021, and employer registration opened in 2023. Eligible employers received the first registration notification prior to July 1, 2023.

The stated goal of the bill is, “To promote greater voluntary retirement savings for private-sector workers in a convenient and portable manner.” Portability means employees may retain their plan’s value when they move to another employer.

The intent is to offer a plan to help close the retirement savings gap and improve the financial security of more Virginians. The program is designed to provide eligible employers a simple way to help their employees save for the future with a minimum of administrative burden.

RetirePath is a state sponsored, mandatory retirement plan that must be adopted by businesses that meet the eligibility criteria. The plan is administered by Virginia529, an independent agency of the Commonwealth of Virginia. Eligible employers must log on to the RetirePath Virginia website to register or seek an exemption no later than February 15, 2024.

In June of this year, RetirePath notified 8,700 Virginia businesses that may be required to participate. These emails and letters include a unique access code, registration deadline and instructions. Virginia law requires eligible employers to either register for the RetirePath plan or offer their own qualified retirement plan.

Note: The RetirePath’s site clearly states that the program “is not meant to replace or compete with employer-sponsored plans.” As an employer you may choose to establish an alternative qualified plan if that is more appropriate for your business and still remain in compliance.

In this article, we’ll detail the employer eligibility criteria. As a shortcut, you may want to click here to take the Employer Eligibility Quiz.

Employer Mandates 

Employers that are eligible in 2023 are those that meet the following criteria and must register by February 15, 2024. Employers …

• With 25+ eligible employees who are at least 18 years of age who work a minimum of 30 hours a week.
• That has been in business 2+ years.
• Without a qualified plan (such as a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b)).

Next Steps: You will need your Access Code delivered to you via email or postal service plus your employer identification number (EIN) to register or seek exemption from the program. If any of the above three requirements don’t apply to your business, you may click on “Certify My Exemption”.

If your company is eligible to participate, you will need to follow the instructions to register for RetirePath. Employer requirements are minimal. If your company is subject to the mandate, you only need to present proof of an alternative qualified plan or register by the deadline of February 15, 2024.

Then set up a payroll deduction for each eligible employee, submit payroll records each pay period and hold an annual open enrollment period.

Note: Employers that are not in compliance will incur a fine of $200 per employee per year.

RichPath Plan Structure: 

• Eligible employees will be automatically enrolled in the plan.
• Automatic payroll deductions will contribute 5% of an employee’s after-tax pay.
• Participating employees’ after-tax contributions will go directly to a Roth IRA.
• Automatic deduction will increase by 1% each year until it reaches the cap of 10% of after-tax pay.
• Employees may change the percentage of their contribution or opt out of the program altogether.
• Employees may customize their investment or choose the plan’s default investment.
• Individuals who are self-employed or don’t work for an employer registered with RetirePath can open an account today

Employer Costs: Most administration costs are handled by the Virginia College Savings board. Employers have no fees to set up their RichPath and incur no fiduciary responsibilities. Additionally, the IRS prohibits employers from making contributions to the plan.

That said, there is sure to be some internal costs of administration … adding employees, removing employees, educating employees, and uploading payroll contributions as these functions will all require administrative time.

The above presentation is meant as an overview only.
Give us a call and we’ll be happy to help you with questions.