State-Mandated Retirement Plans: What Your Business Needs to Know
More than a dozen states now require employers to offer a retirement plan or enroll employees in a state program. Offering your own 401(k) satisfies every state mandate, and it gives you far more than the state option.
Updated for 2026.
Stay Compliant, Do More
A free review of your state’s requirements
What is a state-mandated retirement plan?
A state-mandated retirement plan is a law requiring private employers that don’t offer a retirement plan to either set one up or enroll employees in a state-run program, usually an automatic payroll-deduction Roth IRA. Rules vary by state, including which employers must comply, deadlines, and penalties.
Every state mandate exempts employers that offer a qualified plan like a 401(k). That means you can choose: register for the state program, or meet the requirement with a plan designed for your business, often with the help of SECURE 2.0 tax credits.
States with retirement plan mandates (2026)
| State | Program | Status |
|---|---|---|
| California | CalSavers | In effect |
| Colorado | Colorado SecureSavings | In effect |
| Connecticut | MyCTSavings | In effect |
| Delaware | Delaware EARNS | In effect |
| Illinois | My Illinois Savings (Secure Choice) | In effect |
| Maine | Maine Retirement Investment Trust (MERIT) | In effect |
| Maryland | MarylandSaves | In effect |
| Minnesota | Minnesota Secure Choice | Rolling out through 2026 to 2028 |
| Nevada | Nevada Employee Savings Trust (NEST) | Rolling out through 2026 to 2028 |
| New Jersey | RetireReady NJ | In effect |
| New York | New York Secure Choice | In effect |
| Oregon | OregonSaves | In effect |
| Rhode Island | RISavers | Rolling out through 2026 to 2028 |
| Vermont | VTSaves | In effect |
| Virginia | RetirePath Virginia | In effect |
Several other states, including Hawaii and Washington, have passed laws for programs that haven’t launched yet, and more are considering them. Employer size thresholds, deadlines, and penalties differ by state and change often, so confirm the current rules on your state program’s website or ask us.
State program vs. your own 401(k)
| Typical state program | 401(k) through Life, Inc. | |
|---|---|---|
| Account type | Roth IRA, after tax | Pre-tax and Roth options |
| 2026 employee limit | $7,500 (IRA limit) | $24,500, plus catch-up |
| Employer contributions | Generally not allowed | Allowed, including safe harbor and profit sharing |
| Owner savings | Limited to the IRA limit | Up to $72,000, or much more with a cash balance plan |
| Tax credits for the business | None | Up to $5,000 a year in startup credits, plus contribution credits |
| Plan design | One size fits all | Designed around your business |
| Satisfies the mandate | Yes | Yes |
How We Build Your Plan
From first call to first contribution, we handle the design, the math, and the compliance.
1
Review Your Business
We look at your income, age, staff census, and current plan to see what’s possible.
Design Your Stack
We layer your 401(k), profit sharing, and cash balance plan around your tax goals.
See the Numbers First
You get a clear illustration of your deduction, your savings, and your staff cost before you commit.
We Run It for You
Plan documents, annual actuarial work, testing, and filings, handled every year.
What happens if you don’t comply?
Most states enforce their mandates with per-employee penalties that increase the longer a business goes without registering or offering a plan. Depending on the state, penalties range from a written warning to several hundred dollars per eligible employee per year, often with annual caps.
Maryland currently uses incentives instead of penalties, and some newer programs haven’t announced penalties yet. The simplest way to avoid penalties in any state is to offer a qualified retirement plan and certify your exemption with the state program.
Which option is right for your business?
The state program may fit if:
- You don’t want to contribute for employees, and owners don’t need to save more than the IRA limit
- You want the lowest possible effort today
A 401(k) usually fits better if:
- Owners want to save more than $7,500 a year
- You want to recruit and keep good employees with a real benefit
- You want to use startup tax credits to offset the cost
- You may want profit sharing or a cash balance plan later
See safe harbor vs. traditional 401(k) and what a 401(k) administrator does.
Michael, a successful business owner with no employees, wanted to maximize his retirement savings while minimizing taxes.
Through a custom-designed retirement plan stack, he and his wife were able to contribute over $575,000 across multiple plans in a single year.
This strategy not only helped secure their financial future but also generated over $222,000 in immediate tax savings, significantly increasing their cash flow and long-term wealth-building potential!
James runs a construction company with high employee turnover and wanted a way to protect cash flow while maximizing retirement contributions.
Through a custom 401(k) and profit-sharing plan design, we used strategic eligibility and vesting schedules to limit costs from short-term employees while allowing ownership to maximize contributions.
This strategy protected company assets, controlled expenses, and helped James build significant retirement wealth.
Eileen, a small business owner, needed a low-cost retirement plan that would meet state mandate requirements while helping her recruit and retain high-quality employees.
Eileen used a customized 401(k) solution focused on minimizing expenses, giving Eileen a competitive edge in hiring without pulling resources away from reinvesting in her growing business.
By using tax credits, her design allowed her to stay compliant, attract top talent, and keep her financial priorities aligned.
*These are hypothetical clients with hypothetical situations and plan designs.
Why business owners work with Life, Inc.
- Everything under one roof. Plan design and administration, investment advisory, and insurance strategies, all from one team. No juggling three different firms.
- A credentialed, in-house team. Our plan specialists hold industry designations including QKA, QPA, and AIF, and handle your plan year round.
- Independent and unbiased. We work with the recordkeeper that fits your business and don’t take kickbacks from any of them.
- Custom, not cookie-cutter. Every plan is designed around the owners’ tax goals first, then built to pass IRS testing.
- Nationwide. We design and administer plans for businesses across the country.
Learn more: 401(k) Tax Credits | Safe Harbor vs. Traditional | 401(k) Administrators | The Retirement Plan Stack | About Us
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Our Most
Asked Questions
What is a state-mandated retirement plan?
It is a state law requiring private employers that don’t offer a retirement plan to enroll their employees in a state-run program, usually an automatic Roth IRA, or to offer their own qualified plan instead.
Which states require employers to offer a retirement plan?
As of 2026, states with active or rolling-out programs include California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, Vermont, and Virginia, with others such as Hawaii and Washington still to launch.
Does a 401(k) satisfy a state retirement mandate?
Yes. Every state mandate exempts employers that offer a qualified retirement plan such as a 401(k). You typically certify the exemption with the state program.
Can employers contribute to state-mandated plans?
Generally no. Most state programs are employee-funded IRAs that don’t allow employer contributions. A 401(k) lets you contribute, which can also qualify you for tax credits.
What are the penalties for not complying with a state retirement mandate?
They vary by state. Many charge a per-employee penalty that increases over time, often with annual caps. Some states use warnings first, and a few use incentives instead.
Is a 401(k) more expensive than the state program?
A state program has no plan fees for the employer, but a 401(k) can be offset by SECURE 2.0 startup credits of up to $5,000 a year for three years, plus credits for employer contributions.
Do owner-only businesses have to comply?
Usually not. Most mandates apply only to businesses with W-2 employees other than the owners, and many apply only above a minimum number of employees.
Some Of Our Trusted Partners:
Life, Inc. Retirement Services does not offer tax advice. Please always consult your tax professional about your eligibility for tax credits.
Life, Inc. Retirement Services is a Registered Investment Advisory Firm of the state of Ohio and licensed in Florida and Maryland. All emails and communication are meant to be informative and educational and should not be considered a sale of security until proper notification and disclosures are given.