On March 28, 2024, Governor Jay Inslee signed a new bill into law, mandating that covered employers in Washington provide their employees with the opportunity to contribute to an Individual Retirement Account (IRA). This new initiative, known as the Washington Saves Program, is scheduled to launch on July 1, 2027. While this may seem like a distant date, it’s important for employers to start preparing now.
For more details on the bill’s signing, click here.
Are You a Covered Employer?
You are considered a covered employer if your business meets the following criteria:
- You’ve been in business in Washington for at least two years.
- Your business had a physical presence in the state during the previous calendar year.
- You do not currently offer a qualified retirement plan.
- Your employees worked a total of 10,400 hours or you employed five full-time employees in the preceding calendar year.
If these criteria apply to you, you will be required to participate in the program and offer your covered employees access to the Auto-IRA.
Employer Responsibilities
As a covered employer, your responsibilities will include:
- Registering with the program
- Choosing an investment plan
- Providing plan information to all employees
- Enrolling employees who do not opt out
- Tracking employee contribution rates and managing payroll deductions
- Submitting contributions to employee accounts
The program sets initial contribution rates between 3% and 10% of gross wages, following IRS contribution rules and limits.
“Free” for Employers? Think Again
While the program is described as “free” for employers, there are indirect costs to consider. Managing the administrative duties—such as registering, choosing a plan, handling payroll frequency, and ensuring compliance—will require time and resources.
Employee Options
Employees will have the freedom to manage their own accounts or allow the state to handle investment decisions on their behalf. They can also increase their contribution rate by 1% annually until reaching the maximum allowed contribution. Additionally, accounts are portable, meaning employees can transfer their savings if they change jobs.
Unanswered Questions
One lingering question is whether an employer who is not initially covered will need to register and contribute to the plan for new employees who already have an account. Unfortunately, that detail remains unclear at this time.
Is This the Right Fit for Your Business?
The Washington Saves Program may or may not be the best fit for your business. However, if you don’t implement an alternative retirement plan (such as a 401(k) or SEP IRA) before the program’s launch, you will be required to comply.
Although the official launch is scheduled for July 1, 2027, the state may introduce a phase-in period. As we wait for additional details—such as the formation of the program’s Board of Directors and the launch of the official website—employers should begin exploring all available investment options to determine what works best for their unique situations.
We will provide updated information as it becomes available.
