Virginia Retirement Mandate: RetirePath VA for Employers
RetirePath Virginia makes covered employers with no plan auto-enroll staff in a state Roth IRA. Deadlines, penalties, and the 401(k) alternative.
Virginia Retirement Mandate
Virginia expects an employer with no retirement plan of its own to plug its people into RetirePath instead. Who the mandate now reaches after the threshold dropped, the registration dates, what noncompliance can cost per employee, how the auto-IRA behaves once payroll starts, and when sponsoring your own 401(k) is the better answer
A Virginia agency owner called me the week a state notice landed on his desk, and his first question was how much this new retirement requirement was going to cost him. The honest answer is nothing. He did not believe it until we read the statute together.
That disbelief is the reason this page exists. Virginia decided that employers could help close the retirement coverage gap without spending a dollar on it, so the mandate asks you to run a payroll deduction and nothing more. You put in no money, you pick no investments, and the law says in plain words that you are not a fiduciary.
What changed is who gets the notice. The eligibility threshold dropped sharply in mid-2026 and the old hours test disappeared with it, so a lot of businesses that were comfortably outside the mandate are now inside it. This covers who is covered now, the registration dates, what noncompliance can cost, how the auto-IRA actually behaves, and when your own 401(k) is the better answer. I build the people and records tooling for businesses without an HR department at FirstHR, which is an onboarding and HR platform rather than a payroll or retirement provider. This is general information, not tax or legal advice.
What RetirePath Virginia Is
RetirePath Virginia is the operating name of the state-facilitated IRA savings program that covered Virginia employers must offer if they sponsor no retirement plan of their own. Enrollment opened to employers on July 1, 2023 under the statute, and the program is administered by the Commonwealth Savers Plan.
Participation is not optional for a business that meets the definition. Virginia Code 2.2-2751 provides that participation in the program is mandatory for eligible employers, that they enroll in accordance with the timeline the plan establishes, and that they facilitate the payroll deposit arrangement for their eligible employees (Code of Virginia).
Virginia is one of a growing group of states running programs of this shape, and the mechanics rhyme across most of them. If you employ people in more than one state, the wider picture of state retirement program requirements is worth reading alongside this, and the rest of what Virginia expects from employers sits in the Virginia compliance hub.
Which Employers Must Register
You are an eligible employer if you are a nongovernmental business in Virginia that employed five or more eligible employees for the period ending December 31 of the preceding calendar year and you do not sponsor a qualified retirement plan. That is the statutory test, and it has two moving parts worth reading closely. The program layers one more condition on top, applying the mandate to businesses that have been operating for two or more years at the time of enrollment.
The first is what counts as an eligible employee. The definition covers any individual who is 18 years of age or older, currently employed, and receiving wages, with a separate provision requiring Virginia taxable income to participate (Virginia Code 2.2-2744). There is no hours-worked test anywhere in it. The program does let employers leave out temporary or seasonal staff who work fewer than ninety days a year, and everyone else who fits the definition counts.
The second part is the exemption, and it is broader than most owners expect. An employer that sponsors, maintains, or contributes to a qualified employer-sponsored retirement plan under Internal Revenue Code section 401(a), 401(k), 403(a), 403(b), 408(k), or 408(p) is not an eligible employer at all. A SIMPLE IRA or a SEP closes the obligation just as completely as a 401(k) does.
Because part-time headcount now matters, the plan eligibility rules you already use are worth a second look. Whether part-time employees qualify for your 401(k) is a separate federal question, and the answer can affect how attractive the exemption route looks.
The Dates on the Calendar
Virginia has run staged, one-off registration dates rather than a single recurring annual deadline. Each wave of employers gets a notice with its own date printed on it, and the two dates attached to the 2026 expansion are the ones most small businesses are working to now.
| Date | What it marks |
|---|---|
| July 1, 2023 | Program enrollment opens to eligible employers under the statute |
| February 15, 2024 | First registration deadline, for employers notified in the opening wave |
| October 30, 2024 | Deadline for businesses identified as newly eligible that year |
| October 30, 2025 | Deadline for businesses identified as newly eligible the following year |
| July 1, 2026 | The lower eligibility threshold takes effect and notices go out to newly covered employers |
| September 30, 2026 | Published deadline for employers eligible in 2026 with 10 to 24 employees |
| October 30, 2026 | Published deadline for employers eligible in 2026 with 5 to 9, or with 25 or more, employees |
| Ten business days after withholding | Outside limit for getting deducted contributions to the program |
The notice matters more than the calendar. The program sends each eligible employer an email or letter carrying a unique access code, a deadline, and instructions, and it expected roughly 35,000 Virginia businesses to receive an initial notice as the expansion took effect. If a code arrived and went into a drawer, that is the document to find before anything else.
An employer becomes eligible the moment it meets the requirements, which means the trigger can be an ordinary hiring decision rather than a calendar event. Adding a fifth part-time employee in one year puts you inside the definition for the next.
What Ignoring It Can Cost
The statutory ceiling is $200 per eligible employee annually. Virginia Code 2.2-2747 directs the board to develop procedures for noncompliance, including enforcement mechanisms and penalties not to exceed that figure, and the board sets the schedule actually applied underneath it.
Scale the first number honestly before deciding this can wait. A per-employee annual penalty on a modest payroll is not a rounding error, and it recurs for as long as the noncompliance does. The program tells employers directly that a business failing to respond before its registration deadline may face that annual penalty, so the exposure is not theoretical.
The cheapest response is usually the boring one. Registration takes an afternoon, certifying an exemption takes less, and either action ends the exposure. Doing neither is the only expensive option.
How the Auto-IRA Behaves
The defaults do nearly all the work. An employee who ignores every message from the program still ends up saving 5 percent of wages into a Roth IRA, with the rate climbing 1 percent each January until it reaches 10 percent.
Two details in that sequence trip people up. The automatic increase applies only after an account has been open more than one hundred and eighty days, so a January hire does not get an escalation the following month. And the account is a Roth by default, which means contributions come out of pay after tax and sit alongside the employee's other post-tax payroll deductions rather than reducing taxable wages. Savers who want a traditional IRA instead can ask for one.
Federal limits cap the whole arrangement well below what a workplace plan allows. For 2026 the IRA contribution limit is $7,500 with a $1,100 catch-up at age 50 and over, against a 401(k) elective deferral limit of $24,500 with an $8,000 catch-up, and the Roth income phase-out for single filers runs between $153,000 and $168,000 (Internal Revenue Service).
That gap is the honest limitation of every state auto-IRA. For a lower-paid workforce that has never saved anything, an IRA funded automatically is a large improvement over nothing. For an owner who wants to put away real money, it is not close to sufficient.
Where Your Responsibility Stops
Your job is registration, roster, deduction, and remittance. Everything that looks like a retirement plan responsibility, from enrollment conversations to investment choices to withdrawals, belongs to the program rather than to you.
The fiduciary point is the one to internalize, because it is why this is a payroll task and not a benefits program. Virginia Code 2.2-2751 states that participating employers are not fiduciaries over the program, that the program is state-administered rather than employer-sponsored, and that no cause of action arises against a participating employer for acting under the chapter.
Compare that with sponsoring a plan. A 401(k) sponsor is a fiduciary under federal law with genuine duties around prudence, fees, and monitoring, which is why ERISA obligations take up so much of a plan sponsor's attention. The board is even required to design and operate the program so that it does not become an employee benefit plan within the meaning of ERISA in the first place.
The practical consequence is that almost all of the effort is front-loaded. Registration and the first roster upload take real time. After that, the recurring work is keeping employee records accurate, which is the same discipline that keeps the rest of your benefits administration from drifting.
Sponsoring a 401(k) Instead
Starting your own plan exits the mandate completely. Virginia Code 2.2-2751(M) preserves an employer's option at all times to set up any type of employer retirement plan, at which point the business stops being an eligible employer and stops facilitating contributions under procedures the board sets.
The federal tax code makes that cheaper than most owners assume. The Internal Revenue Service retirement plans startup costs credit covers a share of qualified setup and administration costs, worth up to $5,000 a year for three years, with the largest percentage reserved for the smallest employers, plus a separate credit of $500 a year for three years for adding automatic enrollment.
What you take on in exchange is real. You become the plan sponsor and fiduciary, you generally file Form 5500 each year, and unless the plan uses a safe harbor design you run nondiscrimination testing annually and live with the corrective distributions when it fails.
The reasons to accept that trade are usually about ambition rather than compliance. A workplace plan lets employees defer more than triple the IRA limit, lets you put employer money behind the benefit, and gives you design choices the state program has no concept of. The mechanics are covered in more depth in the guides to a startup 401(k) and to a safe harbor design.
The Two Options Side by Side
The state program is cheaper for you and weaker for your employees. A sponsored plan is the reverse. Laid out row by row, the trade is easy to see.
| Dimension | RetirePath Virginia | Your own 401(k) |
|---|---|---|
| Employer contribution | Prohibited by statute | Optional, and required under a safe harbor design |
| Cost to the employer | None to participate | Provider fees plus any employer contribution |
| Who pays account fees | The saver | Split between employer and participants by plan design |
| Employer fiduciary duty | None, stated expressly in the statute | Yes, you are the plan sponsor |
| Annual federal filing | None from you | Generally Form 5500 |
| Nondiscrimination testing | None | Yes, unless the plan is safe harbor |
| Employee contribution ceiling | IRA limit, $7,500 for 2026 | Deferral limit, $24,500 for 2026 |
| Account type | Roth IRA by default, traditional on request | Pre-tax or Roth, by plan design |
| Federal startup tax credit | Not applicable | Up to $5,000 a year for three years |
| Setup effort | Registration, a roster, and a payroll deduction | Plan document, provider selection, ongoing administration |
Savers do carry a cost inside the state program, and it is small but not zero. The program description puts the account fee at $27.00 a year, assessed quarterly at $6.75, and the annualized asset-based fees at roughly 0.22 percent to 0.32 percent depending on the investment option, a figure that includes a 0.20 percent program administration fee.
Set against the rest of your spending, the two options are not in the same category at all. A state auto-IRA is a compliance line with no budget attached, while a plan you sponsor lands squarely in the same conversation as the rest of your benefits cost per employee.
Which One Fits Your Business
For most small Virginia employers with no plan today, registering is the right first move and a 401(k) is the right second one. The two are sequential rather than mutually exclusive, and the statute explicitly lets you switch.
Federal rules have moved steadily toward making small employer plans cheaper and simpler to run, which changes this calculation over time. If you looked at a plan a couple of years ago and decided it was out of reach, the changes tracked in SECURE Act 2.0 deserve a fresh look before you settle for the state program permanently.
Getting Registered
Registration is a short sequence, and most of the delay comes from hunting for information rather than from the process. Gather the pieces first and the rest moves quickly.
Where Employers Get This Wrong
Five patterns come up repeatedly, and the first is the one created by the recent change.
Relying on an old headcount reading is first. An employer who checked eligibility against the previous threshold, or who assumed part-time staff did not count, can be inside the mandate now without anything else about the business having changed.
Ignoring the notice because the business is exempt is second. An employer that already sponsors a qualifying plan still needs to record that fact through the portal rather than assuming the state can see it.
Deducting before the decision window closes is third. Starting a deduction for somebody who was still inside the opt-out period creates a refund, an awkward conversation, and a payroll correction that nobody needed.
Holding withheld contributions is fourth, and it is the most serious item on this list. Money deducted from a paycheck has to reach the program on the earliest date it can be sent, and no later than ten business days after withholding. Late remittance moves the problem out of program compliance and into labor law.
Answering investment questions is last. The program communicates directly with savers precisely so that employers do not have to, and the statute bars employers from endorsing or promoting the program at all. A well-meant opinion about a target date fund is a step toward a role the law deliberately keeps you out of.
Frequently Asked Questions
What is the Virginia retirement mandate?
It is a state law requiring private Virginia employers that sponsor no qualified retirement plan to enroll their employees in RetirePath Virginia, the state-facilitated IRA savings program. The framework sits in Chapter 27.1 of Title 2.2 of the Code of Virginia, which makes participation mandatory for eligible employers and directs them to facilitate a payroll deposit retirement savings agreement for their eligible employees. Each eligible employee is enrolled automatically unless the employee opts out. The employer runs the deduction and remits the money. The employer contributes nothing, selects no investments, and is expressly not a fiduciary over the program. The program is administered by the Commonwealth Savers Plan rather than by the employers who feed it.
Who has to register for RetirePath Virginia?
A nongovernmental business, whether for profit or nonprofit, that employed five or more eligible employees for the period ending December 31 of the preceding calendar year and does not sponsor a qualified retirement plan. The threshold used to sit at 25 or more employees. Amendments effective July 1, 2026 lowered it to five. An eligible employee is anyone 18 or older who is currently employed and receiving wages, and who has Virginia taxable income. There is no hours-worked test in the current definition, so part-time staff count toward the five, as do seasonal workers who exceed ninety days a year. The program also applies the mandate to businesses that have been operating for two or more years at enrollment. Government employers are outside the definition, as is any employer sponsoring a plan qualified under Internal Revenue Code section 401(a), 401(k), 403(a), 403(b), 408(k), or 408(p).
What is the penalty for not registering for RetirePath Virginia?
The statute authorizes penalties of up to $200 per eligible employee annually. Virginia Code 2.2-2747 directs the program board to develop procedures for noncompliance, including enforcement mechanisms and penalties not to exceed that amount. The board sets the schedule actually applied within that ceiling, so the figure you face in a given year may be lower than the cap. There is a second exposure that employers overlook. Virginia Code 2.2-2751(F) provides that an employer who withholds wages but fails to submit the contributions to the program on time may be subject to violations of federal and state labor laws and the penalties that come with them. Deducting money and sitting on it is a materially worse position than never registering at all.
How much is deducted from an employee's paycheck?
The standard election is 5 percent of wages each pay period, contributed after tax into a Roth IRA. Once an account has been open more than one hundred and eighty days, the rate increases automatically by 1 percent of wages each January until it reaches 10 percent. Savers can decline the annual increase, set a different rate, switch to a traditional IRA, or stop entirely at any point. Contributions for a year also stop once the federal IRA maximum has been reached. Under standard elections the money is first invested in the capital preservation option and then sweeps into a target retirement date fund thirty days after the initial contribution.
Do Virginia employers contribute to RetirePath?
No, and they are not allowed to. Virginia Code 2.2-2751(N) states plainly that no employer shall be permitted to contribute to the program or to endorse or otherwise promote it. The program description adds that an employer may not provide tax, investment, or financial advice about the program either. This is the structural difference between the state auto-IRA and a plan you sponsor: the state program costs you administrative effort and payroll integration, while a 401(k) costs you money and creates obligations the state program deliberately keeps you out of. If you want employer dollars behind your team's retirement savings, sponsoring your own plan is the only route that permits it.
Can employees opt out of RetirePath Virginia?
Yes, at any time, and participation is entirely voluntary for the employee. Virginia Code 2.2-2751 provides that each eligible employee is enrolled unless the employee elects not to participate, and that a participant may terminate participation at any point in a manner prescribed by the board. In practice the program contacts each employee after onboarding and gives a thirty day window to opt out or customize the account. Someone who opts out inside that window never has a deduction taken. Someone who leaves later has the deduction stopped and can withdraw what has already been contributed. Employees who opt out can rejoin later. None of that conversation is yours to manage.
Is a 401(k) better than RetirePath Virginia?
It depends on whether you want retirement savings to do anything for you beyond closing a compliance obligation. Virginia Code 2.2-2751(M) preserves your right to set up any type of employer plan at any time, at which point you stop being an eligible employer and stop facilitating contributions. A 401(k) allows employee deferrals more than triple the IRA limit, allows employer money, and can qualify for a federal startup credit. It also makes you the plan sponsor and fiduciary, with annual filings and testing that the state program does not create. For most employers with no plan today the two are sequential rather than exclusive: register to close the obligation now, revisit the plan question when payroll and hiring pressure justify the cost.
What does the employer actually do each pay period?
Run the deduction and send the money on time. Once registration is done and the employee decision window has closed, the recurring work is deducting each participating employee's elected percentage, transmitting contributions no later than ten business days after withholding, and keeping the roster current as people are hired, leave, or change their rate. The program handles enrollment communication, investment selection, account changes, statements, and withdrawals. Most small employers find the ongoing effort closer to a payroll task than to benefits administration, which is exactly how the statute is designed. The heavy part is the first registration and the first roster upload, not the steady state.