BY PHIL SHETSEN
How many times has this scenario played out: You check your inbox in the morning and sift through emails, tasks, and reminders. Amid the noise, you stumble upon something that catches your eye—an email about a state-mandated retirement plan your business must comply with by 2025.
The sender? A Fortune 100 company’s sales team preying on your concerns, hoping to catch you in a cold sweat. Intrigued but skeptical, you wonder: “What regulations? Thanks for the heart palpitations, but how does it affect me?”
Let’s pause right here.
At this point, you might take one of two paths:
1. You’ve considered setting up a retirement plan in the past, so now you need to act. You let the Fortune 100 company sell you a generic product, ticking the compliance box without much thought.
2. You dig deeper to understand what’s required and whether there lies an opportunity to create a meaningful program that builds wealth for you and your employees while offering long-term benefits for your business.
If you’re leaning toward the first option, consider this: State-mandated retirement plans are a reality, but you’re likely working with too large of a company for anyone to take real accountability over guiding you through the process. Off-the-shelf plans will get the job done, but option two might be the better fit and lead to a plan that best suits the needs of your unique operation.
Understanding your options now can save you headaches down the road and unlock opportunities for tax-advantaged growth and employee satisfaction.
Navigating State-Mandated Retirement Plans
As of October 2024, 12 states have active state-mandated retirement programs, with more than 20 others in various stages of implementation. These mandates aim to address the retirement savings crisis in the US, ensuring more workers have access to savings options.
Here’s a snapshot of key state programs:
| State | Employer Threshold for Compliance |
| California | Employers with 5 or more employees |
| Oregon | Employers with 5 or more employees |
| Illinois | Employers with 5 or more employees |
| Connecticut | Employers with 5 or more employees |
| New York | Employers with 10 or more employees (rolling out) |
| Maryland | Employers with automatic payroll withholding |
| Colorado | Employers with 5 or more employees |
| Virginia | Employers with 25 or more employees |
| New Jersey | Employers with 25 or more employees |
| Maine | Employers with 5 or more employees (rolling out) |
| Massachusetts | Nonprofit employers with 20+ employees |
| Vermont | Voluntary for employers, state facilitated |
State-sponsored plans, like Roth IRAs, have lower contribution limits and fewer features compared to 401(k)s. Noncompliance can result in fines, penalties, and damage to your business’s reputation.
The Difference: Big Guys vs. Right Guys
Large financial firms often push standard retirement plans, but those solutions can lack customization, ongoing advice, and long-term management. That’s where smaller, more tailored approaches come in, especially if you value the relationship with your vendor partners. Instead of simply meeting the minimum requirements, you can turn the downward pressure of governance into an opportunity to:
❱ Retain Top Talent:
Many transportation services struggle to hire and keep staff, especially chauffeurs. Offering a robust retirement plan is a powerful way to attract and keep your best employees, which can build loyalty to your company as your team feels valued.
❱ Ensure Flexibility: With a private 401(k) program, you have better investment options, control, and scalability compared to state-sponsored plans.
❱ Generate Personal Wealth: By structuring your plan wisely, you can contribute to your retirement while creating a future nest egg. This is especially important for small business owners who often neglect their own investments.
Building a Retirement Plan That Benefits Everyone
Here’s how a boutique insurance broker can help you create a retirement plan that supports your employees and contributes to your financial future:
1. The Right Plan: Partner with a knowledgeable advisor who can identify whether a 401(k), Simple IRA, or other plan suits your business.
2. Make Employer Contributions Work for You: Use employer matches and profit-sharing strategically. These not only reward employees but also allow you to grow your own retirement savings.
3. Prioritize Investment Options: Choose a plan that offers diverse, high-quality investment choices to maximize growth potential. 4. Think Long-Term: Pair your retirement plan with a succession strategy. In 15-20 years, when you’re ready to sell your business, you’ll have a pool of savings to draw from.
5. Educate Employees: Offer guidance to your staff about maximizing their contributions and understanding the benefits of your plan. It’s not just about retention; happy employees lead to a stronger business.
If there’s one thing you take away from this article, it should be this: state mandates are coming, but you don’t have to settle for a one-size-fits-all solution. By taking a proactive, strategic approach, you can meet compliance requirements, secure your financial future, and strengthen your workforce—all at the same time.
Don’t let mandates dictate your options. Instead, turn them into valuable opportunities for you and your team. [CD0225]
Phil Shetsen is the president of Bona Vita Benefits. He can be reached at phil.shetsen@prudential.com.