Washington State to Offer State-Facilitated Auto-IRA

Washington will be the newest state to offer a state-facilitated automatic individual retirement account program, as both the Senate and House have passed the bill creating the Washington Saves program. 

Senator Mark Mullet (D-Issaquah) first introduced SB 6069 on January 9, 2024. The Senate passed it on February 12, and the House passed it on March 1 in a 57-39 vote and then passed an amended version with the Senate’s views on March 6. The bill now awaits the signature of Governor Jay Inslee, a Democrat. 

According to The Pew Charitable Trusts, 1.2 million workers—43% of Washington’s private-sector workforce—currently do not have access to retirement savings through their jobs, and Washington Saves could help provide access to retirement savings for these workers. 

The Washington Saves auto-IRA program requires covered employers to allow employees an opportunity to contribute to an IRA through an automatic payroll deduction.  

Covered employers are businesses located in Washington State for at least two years, that had employees working a combined minimum of 10,400 hours during the previous calendar year and do not already offer employees a qualified retirement plan.   

Covered employees, who do not opt out of the program, will be automatically enrolled at the default rate or at an amount specified by the employee in connection with the payroll deduction IRA agreement. Individual participants are allowed to modify their contribution rates or terminate their participation in the program at any time. The default contribution rate must be at least 3%, but no more than 7%, of wages.  

The auto-IRA also has a default escalation rate, which may not exceed 1% per year. The maximum contribution rate based on the default escalation rate cannot exceed 10% of wages. 

Individual accounts are portable and a former participant who is either unemployed or employed by a non-covered employer, is able to continue to contribute to their individual account.  

Employers are not allowed to contribute to the IRA through the program, and they are not considered fiduciaries nor do they have any liability for the program. However, employers have some responsibilities, such as providing program information to employees—including specific disclosures—and providing information on making contributions, investment selections, transfers, rollovers, withdrawals and other distributions from the employee’s IRA.  

Automatic savings programs, also known as “Secure Choice” or “work and save” programs, already exist in 15 states. The programs are often administered by firms including Vestwell, Ascensus and Ubiquity Retirement + Savings.  

As of the start of 2024, state-facilitated retirement savings programs had accumulated more than $1.26 billion in assets, according to the Center for Retirement Initiatives at Georgetown University.  

The most recent auto-IRA bill to be introduced, prior to Washington, was in Michigan. It would create the MI Secure Retirement auto-IRA program. Other programs were enacted last year in Minnesota and Nevada, while Missouri started a multiple employer plan. Additionally, Vermont switched to an auto-IRA from a MEP in 2023.  

Washington’s legislation, SB 6069, creates a 15-member governing board for the program. The board will be in charge of designing and administering the program for employees in the state. The board will begin meeting in 2025, and the program must be launched by January 1, 2027, according to the bill.  

Other sponsors of the bill include Democratic Senators Mark Mullet, Javier Valdez, Sam Hunt, Marko Liias, Joe Nguyen, Rebecca Saldana and Kevin Van De Wege.