Many small to midsize business owners face a pressing challenge today: state mandates requiring employers to offer retirement plans to their employees. As of this writing, over 20 states have enacted legislation for state-mandated retirement plans. Of those 20, 15 states are fully active.

With more states looking to roll out similar legislation, understanding the basics of state mandated retirement plans can keep SMBs ahead of the curve.

Understanding the complexities of these mandates and selecting the right path forward can feel daunting, especially for businesses in remote locations or industries with high turnover. Fortunately, with informed guidance like from our recent webinar, business owners can not only comply but also turn these requirements into an opportunity to benefit their teams and streamline operations.

Common Retirement Challenges for Employers

Bracken El-Bakri, Vice President of Retirement Plan Adoption at VensureHR, opened the discussion From New York to Nationwide: Understanding the Rise of State‑Required Retirement Programs – VensureHR by acknowledging the difficulties many employers face.

“Many groups don’t have a retirement plan at all, and they struggle with the administration of those plans, ” he said.

Business owners often find themselves caught between new state mandates and the practical realities of offering a plan, such as understanding eligibility requirements and handling administrative burdens.

The core of the issue, Bracken noted, lies in why employers haven’t offered plans previously.

 “Many employers don’t think about, why isn’t this employer already starting a plan? What administrative struggles might they have that we need to help them overcome.”

Addressing these root causes is essential to finding effective, long-term solutions.

Why Do State Mandated Retirement Plans Exist?

State mandates sweeping across nationwide have many asking “was retirement that broken to begin with?”

The hard truth? It’s more broken than many business owners and employees alike cared to admit.

There’s a significant retirement savings gap in the U.S., with 38 million workers employed by businesses that do not provide any retirement plan options.

“An employee’s 8 times more likely to save if they have a chance to do so at work from their paycheck,” Bracken explained.

Payroll-deducted plans facilitate easier saving—“typically, they just set it and forget it,” Bracken added. The state and federal governments aim to close this gap through mandates and incentives.

Congress has introduced changes such as pooled employer plans designed to ease administrative burdens and fiduciary responsibilities. Additionally, federal tax credits are now available for eligible employers to offset costs, making it more attractive to offer retirement plans.

Understanding Your SMB Compliance Options

Business owners in New York and other states with mandates have several compliance options. Bracken highlights three primary avenues:

1. Participate in the State-Run IRA Program (e.g., New York Secure Choice)
2. Offer a Traditional 401(k) or Employer-Sponsored Plan
3. Use a Pooled Employer Plan (PEP)

Each option has unique features and implications.

The New York Secure Choice program requires employers with more than 10 employees (earning over $5,000 annually) and in business for at least two years to register and either offer the program or certify an exemption. Employers must upload employee census data and facilitate automatic enrollment unless employees opt out.

 “Whether you offer something today or not, in order to be exempt from penalties, you still need to register and register before the deadlines,” Bracken said.

Customization and Employee Experience: The 401(k) Advantage

One of the biggest differences between state-run IRAs and 401(k) plans is customization. Bracken explains, “These plans are a lot more customizable and flexible on the plan design. You get to decide how long somebody works for you, or if there’s going to be an employer contribution.”

Crucially, automatic enrollment rules vary: in state IRAs, all employees 18 and up are automatically enrolled, while 401(k) plans allow employers to set eligibility timing, which can reduce employee dissatisfaction.

Employees often feel unprepared for automatic deductions, particularly in the state program where the contributions are Roth and after-tax, making the reduction in take-home pay very noticeable.

Tax Benefits and Financial Outcomes for Employer-Sponsored Plans

Federal tax credits provide a compelling incentive to offer employer-sponsored plans. Bracken notes these credits can offset administrative expenses up to $5,500 a year and cover up to $1,000 per employee to offset the cost of an employer match.

Offering a match not only benefits employees but can be nearly cost-neutral to employers after claiming these credits.

Additionally, 401(k) plans permit pre-tax contributions, which can improve employees’ retirement savings without significantly impacting their immediate cash flow.

Reducing Administrative Burden with Pooled Employer Plans

While traditional 401(k) plans offer many advantages, they come with administrative and fiduciary responsibilities that some employers find overwhelming, such as annual Department of Labor filings and possible audits.

Enter Pooled Employer Plans (PEPs).

Bracken describes this relatively new structure: “Congress was specifically trying to target those downsides of a 401(k) plan.”

With a PEP, employers enjoy the benefits of a 401(k) while leaving behind many complex administrative duties. Anecdotally, approximately 65-70% of employers Venture speaks with choose PEPs as their compliance solution.

PEPs are often directly integrated with payroll systems, streamlining contribution tracking and adjustments, unlike some state-run programs where employers manually upload data per payroll cycle.

Key Takeaways and Next Steps

Navigating retirement plan mandates can be complex, but timely action is critical. Bracken encourages business owners to evaluate current plan status and compliance readiness promptly:

“The first thing I would do is say, what do we got? Do we have something in place? Are we ready? Or are we going to possibly run into the mandate and penalties?”

If your business operates in New York or other states with mandates, and you’re feeling the weight of compliance decisions and administrative requirements, you’re not alone—and help is available. VensureHR is ready to guide you through understanding your options and implementing a solution that fits your industry, workforce, and business goals. Simplify plan management, reduce costs, and improve employee satisfaction by exploring the right retirement plan for your company.

Contact VensureHR today to schedule a consultation with our retirement plan experts. Let us help you turn this challenge into an opportunity for your business and your employees.