Vermont is one of the latest states providing a state-run plan for private-sector employees whose employers are not covered under a workplace retirement plan. Gov. Phil Scott (R) has signed into law that called for the creation of VTSaves.
VTSaves will be an auto-IRA program, through which payroll deductions will be contributed to an IRA.
Contributions will be made to a Roth IRA; however, 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.
Employers that don’t have a workplace retirement plan will be required to sign up. The requirement will be phased in by the following schedule, over time:
· Beginning July 1, 2025, all covered employers with 25 or more covered employees must offer the program to all covered employees.
· Beginning Jan. 1, 2026, all covered employers with 15-24 covered employees must offer the program to all covered employees.
· Beginning July 1, 2026, all covered employers with 5-14 covered employees must offer the program to all covered employees.
Employees of covered employers will be enrolled in a Roth IRA with automatic payroll deductions. The initial contribution rate will be 5% of an employee’s compensation, but the State Treasurer could require an annual increase of each active participant’s contribution rate, by not less than 1%, but not more than 8%, of salary or wages each year.
Employees will have the ability to adjust their contribution rates; rollover the funds in their accounts into other IRAs or other retirement accounts; and opt out of the auto enrollment.