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Green Mountain State Joins Retirement Plan Club

State Auto-IRA Plans

Vermont is now among the states providing a state-run plan for private-sector employees whose employers are not. Gov. Phil Scott (R) has signed into law the measure that called for the creation of their iteration.

Image: Shutterstock.comOn June 1, Scott signed S. 135, the bill that creates VTSaves. Action on the legislation came rapid-fire: It was introduced on St. Patrick’s Day and less than three weeks later, the Senate passed it unanimously; the House passed its version on May 9. The Senate approved a reconciled version on May 11.

What the New Law Does

VTSaves will be an auto-IRA program, through which payroll deductions will be contributed to an IRA. Contributions will be made to a Roth IRA; however, the state Treasurer has the authority to add an option for all participants to elect to contribute to a traditional IRA instead of a Roth.

Employers that do not already have a workplace retirement plan will be required to sign up. The requirement will be phased in by the following schedule:

  • Beginning July 1, 2025, all covered employers with 25 or more covered employees must offer the program to all covered employees. 
  • Beginning Jan. 1, 2026, all covered employers with 15-24 covered employees must offer the program to all covered employees. 
  • Beginning July 1, 2026, all covered employers with 5-14 covered employees must offer the program to all covered employees.

Employees of covered employers will be enrolled in a Roth IRA with automatic payroll deductions. The initial contribution rate will be 5% of an employee’s salary or wages, but the Treasurer could require an annual increase of each active participant’s contribution rate, by not less than 1%, but not more than 8%, of salary or wages each year. 

Employees will have the ability to: 

  • adjust their contribution rates;
  • roll over the funds in their accounts into other IRAs or other retirement accounts; and
  • opt out of the program.

Effective Date

The new law takes effect July 1, 2023.