Retirepath VA - The Biggest Retirement Problem You've Never Heard Of

What Virginia Is Doing To “Help” Folks Save for Retirement

Virginia has implemented a new program, dubbed RetirePath (all one word) VA. The Commonwealth recognizes that 45% of Virginia’s workers do not have access to a 401(k) or other employer retirement plan – over 1,000,000 Virginians![1] Virginia intends RetirePath VA to bridge that gap and steer employees towards increased retirement savings.

RetirePath VA is a program in which employees of most non-governmental companies (including nonprofits!) will be enrolled in a system to withhold a portion of their paycheck, which is then remitted to their RetirePath IRA. This is not an employer-sponsored retirement plan; in fact, an employer cannot contribute to a RetirePath IRA on behalf of their employees. The only actions the employer takes (hypothetically) is to provide Virginia with a list of eligible employees and then remit the payroll withholding to RetirePath.

In this article, we will take an honest look at RetirePath VA. Our goal with this article is to inform both Virginian employers and employees of the good, the bad, and the ugly.

What Good Is RetirePath VA?

Virginia is right about one thing. There is a genuine need for folks to save more for their own retirement. Even in this world of 401(k)s, IRAs, and other forms of retirement savings, 55% of Americans state that they don’t feel prepared for retirement.[2] And RetirePath doesn’t shrink away from that fact; it’s designed to embrace it. You see, Virginia mandate states that employees must default to contributing 5% of their paycheck to this RetirePath IRA, subject to auto-escalation over the next several years up to 10%.

Unlike an employer-sponsored retirement plan, workers can keep the same RetirePath VA account even when they switch jobs. And Retirepath defaults employee withholdings into Roth accounts, meaning that when that money is withdrawn after the employee attains age 59.5, it will be tax-free upon withdrawal. This Roth default can simplify the employee’s tax consequences, both upon contribution and upon withdrawal.

What Issues Does RetirePath VA Have?

RetirePath has many potential issues that businesses will unfortunately experience firsthand as many businesses are forced to enroll effective July 1^st, 2026. Let’s talk about a few of them.

1. Consider Sam, an employee making $70,000. He is automatically enrolled in Retirepath VA, and accordingly, 5% of his wages are contributed ($3,500). The issue is that Sam (like most of us) doesn’t track every single paystub. And he is motivated to save for retirement, so he (independently of RetirePath) maxes out his Roth IRA at $7,500. This sounds great—until the IRS catches Sam making excess deferrals into a Roth IRA. The consequences include excise taxes and taking money prematurely out of his Roth IRA.
2. Similarly, meet Sarah, a single filer who makes $220,000 a year. She is not eligible to contribute to a Roth IRA since her MAGI (Modified Adjusted Gross Income) exceeds $168,000 in 2026. In other words, she can’t participate in RetirePath VA’s Roth default account—but she is auto enrolled regardless. Like Sam, this results in excess removals and recharacterizations of employee deferrals.
3. RetirePath VA has snuck up on many employers. And it’s not the fault of business owners! Virginia has not done the best job of spreading the news to all employers. We have even heard of some businesses in our area who did not hear of the July 1, 2026 RetirePath update until financial advisors happened to approach them about it. And ignoring RetirePath is not a solution; Virginia may levy an annual $200/eligible employee fine against non-complying employers. For a business with 70 employees who hasn’t complied since the initial enrollment date of July 1^st, 2023, that may mean that a penalty of $56,000[3] awaits them if they do not comply. And large penalties aren’t new to retirement plans—but Virginia has not communicated this clearly to employers and business owners.
4. RetirePath previously stated that employees were only eligible if they worked over 30 hours in a week. But HB176[4] removes that requirement, meaning that even the most part-time of employees (so long as they are not classified as seasonal workers—confusing, we know!) must be included in RetirePath VA.
5. Employers with payroll in multiple states (construction companies, multiple locations, etc.) encounter further complexity in that they must enroll their Virginia employees in RetirePath but must not enroll their employees in other states.
6. Employers must remit payroll contributions to RetirePath within 10 days, lest the remittance be marked as untimely.[5] This creates an administrative burden on payroll teams.

All of these issues (and more) lead the authors to believe that many businesses will have a RetirePath journey that is far from painless. Whether it be penalties, increased administrative burden, or just general confusion, employers may be thinking about RetirePath VA much more than they forecasted or desired.

Is There a Better Path Than Retirepath VA? 

For some businesses, there is. And Virginia understands this; they have stated that if an organization has a qualified retirement plan (such as 401(k), 403(b), or SIMPLE plan), that organization is exempt from registering in RetirePath.

If you'd rather build a qualified retirement plan than manage the hassle of RetirePath VA, a 401(k) may be the answer, thereby offering greater flexibility and stronger wealth-building potential for owners and employees alike. At Brown Edwards, our white-glove approach takes the administrative burden off your plate. Fill out the interest survey below, and we'll reach out to see if a 401(k) is the right fit for your business. 

[1] IRA Retirement Plan Solution for VA Businesses | RetirePath Virginia

[2] Retirement readiness trends: Financial preparedness snapshot | Empower

[3] 70 employees * $200 penalty * 4 years (2023-2026) = $56,000 total penalty.

[4] HB176 - 2026 Regular Session | LIS

[5] HB176 - 2026 Regular Session | LIS