State Retirement Plan Mandate Laws Made Simple for Small Business Owners
Siân Killingsworth / 11 Sep 2023 / 401(k) Plan Information, State Mandated Retirement Plans
Owning a small business comes with a long to-do list. You’ve got inventory, payroll, marketing, and customer service to think about. But there’s something else that’s important: retirement plans for you and your team.
This guide will help you make sense of the rules, known as state retirement plan mandate laws. These rules can vary by state but usually mean that you need to offer some kind of retirement savings option for your employees.
What Are State Retirement Plan Mandate Laws?
State retirement plan mandate laws are rules set by states. They require small business owners to offer retirement plans to employees. The goal is to help more people save money for their future. If you’re not sure whether your state has such a law, no worries—this guide has got you covered.
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Why Are These Laws Important for Small Businesses?
- Helping Employees Save for Retirement: Small businesses often find it tough to offer retirement benefits. Maybe you’re low on resources or just don’t know where to start. These laws help by making it easier to offer retirement plans.
- Avoiding Penalties: If you don’t follow these laws, you could face fines. Staying up-to-date helps you avoid this headache and shows you’re a responsible employer.
States with Retirement Plan Mandates:
Eighteen states have implemented retirement savings initiatives to assist people in building their nest eggs for the future. These programs differ in their requirements, frameworks, and implementation timelines, making it crucial to grasp how these changes might pertain to your situation. Here is a list of states that have these types of laws. Each state may have its own unique program or requirements:
- California (CalSavers)
- Colorado (Colorado Secure Savings)
- Connecticut (MyCTSavings)
- Delaware (Delaware Earns)
- Hawaii (Hawaii Retirement Savings Program)
- Illinois (Secure Choice)
- Maryland (MarylandSaves)
- Massachusetts (MassSaves)
- Minnesota (SecureChoice Retirement Program)
- Missouri (Missouri Workplace Retirement Program)
- New Jersey (NJ Secure Choice)
- New Mexico (New Mexico Work and Save Program)
- New York (NY Secure Choice)
- Oregon (OregonSaves)
- Vermont (VT Saves)
- Virginia (RetirePath VA)
- Washington (Small Business Retirement Marketplace
Plus, several states have pending legislation: Arizona, Arkansas, Idaho, Indiana, Iowa, Kentucky, Louisiana, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Utah, West Virginia, Wisconsin, and Wyoming.
Follow Your State’s Laws:
- Know Your State’s Rules: First, figure out what your state requires. Laws can change, so keep an eye out for updates.
- Check Your Current Plan: If you already offer a retirement plan, make sure it follows your state’s rules. If not, you might need to find a new plan.
- Find a Good Retirement Plan Provider: It’s easier to manage retirement plans when you have expert help. Look for a provider who understands small businesses and can help you follow state laws.
401(k) Plans May be Better than a State-Offered Retirement Plan
Following state laws about retirement plans is good for everyone. Your employees will appreciate having a way to save for their future. You’ll avoid penalties and fines. Plus, a good retirement plan can help you attract and keep top employees. However, retirement plans offered by your state may not be the best choice for your business. It’s vital to take a look at alternatives. That’s where the Ubiquity Retirement + Savings 401(k) plan comes into the picture, offering a plethora of advantages that make it a superior alternative.
A 401(k) Offers Greater Savings Potential
One of the most compelling reasons to opt for Ubiquity’s 401(k) plan is the sheer ability to save substantially more money compared to an Individual Retirement Account (IRA), which is usually the basis for state-sponsored plans.
As of 2023, the maximum contribution limit for an IRA is significantly less than that for a 401(k). Ubiquity allows you to contribute up to three times more per year than you could with a typical IRA. This higher cap is a game-changer for those who are keen on building a sizeable nest egg, offering an accelerated route to a comfortable retirement. Retirement contribution limits are updated by the IRA every year, so make sure you know how much you can save.
Employer Match Contributions
State-provided plans often lack the feature of employer-matching contributions, a missed opportunity for accelerating employee savings and enhancing employer-employee relations. Ubiquity’s 401(k) plans offer the option for employer-matching, which can act as an additional financial incentive for employees. This not only aids in the retention of valuable talent but also fosters a work environment where employees feel financially supported by their employers. Additionally, these contributions are tax-deductible for businesses, offering yet another fiscal advantage.
Flexibility and Control
When you opt for a state-provided plan, you’re usually locked into a standard set of features with minimal flexibility. Ubiquity’s 401(k) plans, on the other hand, give you more control over your retirement savings plan features. This means you can tailor the plan according to the unique needs and objectives of your business and its employees. Whether it’s investment options, risk tolerance levels, or distribution methods, having more control allows you to design a plan that aligns perfectly with your financial goals.
Federal Tax Credits for Setup Costs
The thought of setting up a 401(k) plan can be daunting for small business owners mainly due to the anticipated setup and administrative costs. This is where Ubiquity further sweetens the deal. The federal government offers tax credits that can cover the setup costs for the first three years of your 401(k) plan.
This is an often-overlooked feature that makes establishing a 401(k) not only more feasible but financially prudent. This credit can make a substantial difference in offsetting the initial costs of plan establishment, making it an even more attractive option for small to medium-sized businesses.
When it comes to retirement savings, Ubiquity Retirement + Savings’ small business retirement plans offer unparalleled advantages over state-provided alternatives. From the ability to contribute significantly more each year to the flexibility of customizing plan features, Ubiquity understands the diverse needs of today’s workforce and employers.
The added benefits of employer-matching and federal tax credits for setup costs further make the case for why Ubiquity’s 401(k) plan should be your go-to choice for securing a financially stable future for both you and your employees.
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