Coming to a state near you: Mandated retirement savings programs

Coming to a state near you: Mandated retirement savings programs

by Carlos Garcia, Founder & CEO of Finhabits

Americans are not saving enough for retirement and relying on social security will not be enough to provide for a comfortable future. States are chiming with legislation that compels businesses to offer retirement benefits to their employees. California, Oregon and Illinois are leading the charge with their programs and 11 others, including New York, Connecticut and Maryland have plans under way.

As a business owner, you want to take care of the people who work hard at making your business succeed. But figuring out how to offer a retirement savings benefit that makes sense for you and your staff members is not for the faint of heart. In fact, when the Pew Research Center conducted a survey on this topic, they found that the main reason employers were not offering retirement benefits was that they were deterred by the cost and time involved.

So whether you have to comply with a state mandate or just believe that it’s good for your business, here are a couple of things you should consider as you dive in:

  1. A 401(k) isn’t a one-size-fits all solution.

When most employers think of providing a retirement benefits they start looking into 401(k) plans. But that’s not the only option to consider. Did you know that as a business you can choose to offer an IRA-based retirement benefit to your staff? And that you can offer it alongside an existing 401(k) plan? It’s not an either/or scenario when it comes to offering work-based retirement savings. Both options can complement each other and be a great solution for many workplaces.

So if you run a business that has a diverse workforce, including part-time and contract workers, you might want to consider providing  an IRA-based retirement savings option. The fees are lower than the typical 401(k), you don’t need to have a plan sponsor, and when your employee leaves, you don’t carry the burden of their account maintenance costs. To find out more, check out our IRA offering from Finhabits™.

  1. Work is the best place to get in the habit of saving for retirement.

If you’re not saving for retirement through a workplace benefit then you’re likely not saving for retirement at all. In fact, research shows that people are 10 to 15 times more likely to save for retirement if they are offered an option through work.

That’s great news for employees who already have access to their company’s 401(k). But for people who work for smaller businesses (especially those with under 100 employees) accessing a retirement plan through work is just not an option.

Financial experts and policymakers are recognizing this problem and have determined that mandated state programs are the way to address this. As each state is rolling out their plan, keep updated on what your state expects of you in your role in solving this societal challenge.

  1. To ensure participation, make it easy to enroll and contribute regularly.

These days anyone can start saving and investing in mere minutes with a mobile app. So why not look for the same feature in whatever retirement solution you offer?

Thanks to mobile-based financial apps like Finhabits, it is easier than ever for businesses of all sizes to offer retirement options. And your staff will really appreciate being able to easily control their contributions and manage their accounts through their phones.

  1. Be prepared for what’s coming by knowing your options.

In an effort to close the retirement gap for hard-working Americans, states have put their best foot forward in implementing state-mandated retirement programs. While they are designing their programs to get workers to start saving for retirement, they don’t necessarily offer a solution that makes sense for every business.

Knowing the essentials of your state’s plan is a good place to start. Find out which deadlines apply to your business and the program fees. Remember,you don’t have to enroll in the state’s program. States allow businesses to opt-out of their program if employers  already have a retirement benefit in place such a 401(k) or an IRA.

State plans have the right intentions, but they don’t necessarily have the right solution for all businesses. Signing up for a retirement benefit now means you can even get ahead of your state’s mandate so you don’t have to worry about it later.

We are here to help you choose the right retirement solution based on your business’ specific needs.  Want to learn more? Check out our Retirement Solutions


Finhabits is the first bilingual retirement savings platform focused in the 55 million U.S. workers without access to a 401(k) plan. Finhabits offers an easy to enroll IRA solution for small business employees across the US.