How to Determine If Your Business is Required or Exempt from RetirePathVA Registration
On May 7, 2021, Governor Northam signed HB 2174, establishing RetirePathVA. This state-run program provides retirement plan coverage to Virginians whose private-sector employers do not offer a retirement plan. Employers who meet the bill's criteria are required to register by February 2024.
Determine if Your Business Meets the Bill’s Criteria
To determine if RetirePathVA applies to you and your business, answer these three easy questions.
- Do you currently offer a retirement plan to your employees (a 401(k), Profit Sharing, or SIMPLE plan)?
- Has your company been in existence for less than two years?
- Do you have less than 25 eligible employees?
An eligible employee is any employee at least 18 years of age who has worked more than 30 hours in any week in the past year.
If you answered "yes" to any of the three criteria questions, you are exempt from registration for RetirePathVA.
If you received a mailing from the Commonwealth of Virginia with your RetirePathVA access code and are certain you are exempt from registration, you will want to log on to the RetirePathVA website and click "Certify My Exemption," so the Commonwealth of Virginia can adjust its records.
If your business has 25 or more eligible employees, has existed for more than two years, and does NOT offer a retirement plan, you must register with RetirePathVA. There is a $200 yearly penalty per employee for all qualified businesses that fail to register. The registration process begins once you receive a mailing from the Commonwealth of Virginia by email or postal service with your access code.
How to Register for RetirePathVA
Qualified employers will need to register by entering information on all of their employees, including their basic information such as name, address, email address, etc. Eligible employees will be enrolled automatically in the plan at a withholding rate of 5%.
Employees can modify their withholdings and change their investment elections on the RetirePathVA website. The changes employees make on the website are then relayed to the employer to adjust for the next payroll processing period. The employer will withhold funds (at 5% or whatever amount the employee decides) from an employee's paycheck and remit those funds to a retirement investment account. Virginia529 will oversee the retirement investment accounts. Employees who do not want to participate in the plan must log on to the RetirePathVA website and adjust their withholding to 0%.
Employers will not be able to make employer contributions to employee accounts, such as a profit-sharing contribution. There will not be an option for any matching contributions to the accounts. RetirePathVA has claimed there is no cost to the employer to provide this opportunity to the employee. However, there is an administrative burden which should be considered.
Next Steps
If your company doesn’t currently offer a 401k plan and would like to evaluate options other than RetirePathVA, we suggest a consultation to determine your best option. Offering a 401k plan to your employees is a great way to increase employee retention and improve employee recruitment. If your company already offers a 401k plan, we suggest an evaluation to ensure you offer the best option for your business and employees.