Nevada, Vermont to Offer State Auto-IRA Programs

More states are following the trend of offering state-sponsored retirement savings plans to private sector workers who would otherwise not have any job-related retirement savings, as Nevada and Vermont are the latest to approve such programs, and another could potentially pass in Pennsylvania.  

The Nevada Assembly passed S.B. 203, which would require all private sector employers with an electronic payroll system in Nevada to offer a retirement plan to their employees, by a vote of 35 to 7 on Sunday. The next step is for Governor Joe Lombardo, a Republican, to sign the bill. The bill would establish the Nevada Employee Savings Trust as an auto-IRA program.  

In addition, Nevada’s bill would create a Board of Trustees of the Nevada Employee Savings Trust and prescribe its membership, powers, duties and limitations. It would also create the Nevada Employee Savings Trust Administrative Fund; the money in the fund would solely be used to pay the administrative costs and expenses of the board and the program. 

The legislation states that members of the board, the trustee and others involved in the administration of the trust are fiduciaries regarding the participants of the program. 

Covered employees would be enrolled in the program automatically, and employees could also opt out, change their contribution rate or withdraw contributions to meet a financial or other emergency.  

The American Retirement Association wrote a letter in April supporting the legislation. 

“The ARA believes that Senate Bill No. 305 strikes the proper balance to close the retirement plan coverage gap in the private sector workforce to the greatest extent possible while imposing the minimum possible burden on Nevada’s employers,” the association wrote.  

Vermont Approves VTSaves 

Governor Phil Scott, R-Vermont, signed S. 135 on June 1, creating VTSaves, an auto-IRA program in which contributions will be collected as payroll deductions. 

Contributions will be made to a Roth IRA, but 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. Here again, employers that do not already have a workplace retirement plan will be required to sign up. Beginning July 1, 2025, all employers with 25 or more covered employees must offer the program, according to the bill. 

Vermont had originally approved a multiple employer plan in 2017, but it was never actually implemented. Instead, the state decided to adopt an auto-IRA.  

In this program, employees will have the ability to adjust their contribution rates, roll over the funds in their accounts into other IRAs or other retirement accounts or opt out of the program.  

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 no less than 1%, but no more than 8%, of salary or wages each year. 

The new law officially takes effect on July 1.  

Pennsylvania Bill Awaiting Vote 

Meanwhile, a proposal to establish a state-sponsored retirement plan with auto-enrollment was passed by the Pennsylvania House of Representatives two weeks ago, by a vote of 106 to 95, and is now under consideration by the Finance Committee of the Republican-led Pennsylvania State Senate. 

H.B. 577, which would create the Keystone Saves Program Fund, Administrative Fund and Advisory Board, is co-sponsored by several dozen Democrats. The legislation was introduced by State Representative Kyle Mullins, a Democrat, on March 20 and approved by the House Commerce Committee on May 3. 

According to a new study released by AARP, nearly half of workers in Pennsylvania do not have access to a retirement plan at work. In addition, nearly 2 million people—41% of Pennsylvania’s private sector employees ages 18 to 64—work for an employer that does not offer a traditional pension or retirement savings plan. 

“My Keystone Saves legislation allows retirees to retire with greater dignity and security,” said State Senator Art Haywood, a Democrat and the prime sponsor of the Senate version of the bill, in a press release. “Keystone Saves will establish automated retirement savings payroll deductions that are then professionally invested. … The work of those without employer-based retirement plans is no less valuable to our economy than any other profession, and their work is no less dignified.” 

A recent AARP poll found that four in five small businesses in Pennsylvania agree that state lawmakers should support the state-sponsored retirement savings program, arguing that “offering a voluntary, portable retirement savings program helps local small businesses attract and retain quality employees and stay competitive.” 

However, House opponents of the bill said in a debate that the legislation could impose a burden on resource-strapped small businesses, and others argued that some employees might not be able to afford to save for retirement in the workplace, as they may be struggling financially.  

The National Federation of Independent Businesses argued in a press release last year that auto-IRA programs, such as the one proposed in Pennsylvania, do not allow for employers to contribute, place limits on employee contributions, result in only minimal gains based on market research and force employees to decide between paying off high-interest debt or saving for retirement.  

The bill states that enrolled employees could set their own contribution levels, increase or decrease their payroll deductions, make investment choices, leave the program at any time or opt out altogether. 

Currently, 18 states have enacted state-facilitated payroll deduction savings, up from 16 at the beginning of the year. Legislators in Missouri and Minnesota passed bills to create a voluntary MEP and an auto-IRA, respectively, earlier this year.