If you run a small business and don’t offer a retirement plan, there’s a decent chance you’re already required by your state to do something about it — and a good chance nobody told you.
More than 20 states have enacted mandatory retirement savings programs that require businesses without a qualified plan (like a 401(k), SIMPLE IRA, or SEP-IRA) to enroll employees in a state-administered Roth IRA. The most immediate deadline: New York’s Secure Choice program requires businesses with 10–14 employees to register by July 15, 2026. Miss it, and you’re looking at penalties that tend to arrive months later, quietly, in the mail.
What These Programs Are
State-mandated retirement programs were designed to close the coverage gap for workers at small businesses that can’t afford to set up and administer their own plans. The structure is straightforward:
- Employees are automatically enrolled in a state-administered Roth IRA, typically at a default contribution rate of 3–5% of wages
- Employees can opt out or change their contribution rate at any time
- The employer’s role is limited to registration and payroll deduction setup — you’re not making contributions, you’re not managing investments, and you’re not taking on fiduciary liability for the fund itself
- The state (or its designated financial administrator) handles the IRA accounts, investment options, and recordkeeping
This is meaningfully different from sponsoring your own plan. You’re essentially acting as a conduit — collecting employee contributions through payroll and forwarding them to the state program.
Which States Have Active Requirements
The list has grown significantly since Oregon launched OregonSaves in 2017. As of mid-2026, states with active auto-IRA programs or mandatory retirement savings requirements include:
- California — CalSavers; businesses with 5+ employees must participate
- Illinois — Illinois Secure Choice; businesses with 5+ employees and in operation 2+ years
- Oregon — OregonSaves; applies to most private employers with 10+ employees (smaller thresholds phased in over time)
- Colorado — Colorado SecureSavings; businesses with 5+ employees
- Maryland — Maryland$aves; businesses with 1+ employees not already offering a plan
- Connecticut — MyCTSavings; businesses with 5+ employees
- New York — NY Secure Choice; now extending to businesses with 10–14 employees with a July 15, 2026 deadline
- Washington, New Jersey, Maine, Virginia, Minnesota, New Mexico, Hawaii — programs enacted or in active rollout
The Georgetown Center for Retirement Initiatives maintains an up-to-date tracker of state programs, including which are mandatory vs. voluntary, their employee thresholds, and current deadlines. It’s the fastest way to check your specific state’s status.
The Penalties Are Real
Penalties vary by state, but the typical structure is $250–$500 per uncovered employee per year. That may not sound catastrophic for a 12-person shop, but the enforcement timeline means you often don’t hear about a violation until well after the fact — and by then, you owe multiple years of penalties at once.
California’s CalSavers, for example, began issuing penalty notices to non-compliant employers in 2022, with fines of $250 per eligible employee for the first 90 days of non-compliance and $500 per employee for each additional 90-day period. A business with 15 employees that ignored the requirement for a year could owe $7,500 or more — for what would have been a free registration process.
What Registration Actually Involves
If you’re in a state with a mandatory program and don’t yet have a qualified plan, here’s what compliance typically looks like:
- Register on the state program’s employer portal — this usually takes under 30 minutes. You’ll need your EIN, business information, and a list of eligible employees.
- Notify employees — the program will typically provide template notices. Employees receive information about the program, their default contribution rate, and their right to opt out.
- Set up payroll deductions — your payroll provider either has native integration (many do, for California and Illinois especially) or you’ll manually enter employees and deduction amounts. The state program or its administrator provides bank routing details.
- Ongoing administration — add new employees within 30–60 days of their hire date, process opt-outs and contribution changes as requested, and forward deductions each pay period.
That’s genuinely the bulk of it. You are not filing plan documents with the IRS, you’re not conducting nondiscrimination testing, and you’re not liable for investment performance. The administrative burden is real but modest.
Should You Register for the State Program or Set Up Your Own Plan?
Registering for the state program is the compliance path — it’s free, it’s fast, and it satisfies the mandate. But it’s worth knowing the tradeoffs if you’re considering setting up your own plan instead:
State auto-IRA program:
- No employer cost to set up or administer
- No employer contributions required
- Employees get a Roth IRA with limited investment options
- You satisfy the mandate without taking on plan sponsorship
SIMPLE IRA (good for small teams):
- Low setup cost; available through most brokerages at no plan fee
- Requires employer to match 3% of compensation or make a 2% flat contribution for all eligible employees
- Higher employee contribution limits than a Roth IRA ($16,500 in 2026)
- You become the plan sponsor, with some fiduciary responsibility
- Employees can choose from a broader investment menu
SEP-IRA:
- Even simpler to set up; contributions are employer-only (not employee elective deferrals)
- Flexible: you contribute only in profitable years
- Higher contribution limits — up to 25% of compensation
- Works well for sole proprietors or very small shops where the owner wants to maximize their own retirement savings
The IRS comparison of small business retirement plans is a useful reference if you’re weighing options. A quick call with a CPA or financial advisor can clarify which makes sense for your situation given your headcount, revenue, and your own retirement savings goals.
How to Check Your Status Right Now
If you’re not sure whether your state has a program and whether your business is covered, here’s a 5-minute checklist:
- Look up your state on the Georgetown CRI tracker (linked above) or search “[your state] mandatory retirement program employers”
- Check the employee threshold — most programs start at 5 or 10 employees; some (like Maryland) start at 1
- Check whether you already offer a qualified plan — if you sponsor a 401(k), SIMPLE IRA, or SEP-IRA, you’re typically exempt from mandatory enrollment
- Note upcoming deadlines — if you’re covered, find the current registration deadline and set a calendar reminder for two weeks before
The July 15, 2026 deadline for New York businesses with 10–14 employees is close. If that’s you, the NY Secure Choice employer portal is available through the New York State Secure Choice website. Registration is free and takes less than an hour.
The Practical Takeaway
State-mandated retirement programs don’t cost you money out of pocket, and the registration process is lighter than most compliance requirements you deal with. The real risk is simply not knowing the deadline exists until after you’ve missed it. Spend 15 minutes this week checking your state’s status. If you’re covered, register before the deadline. If you’re not covered yet, note when the threshold might change — several states have been lowering their employee minimums over time, and the program you’re exempt from today may apply to you next year.
Your employees get a retirement account they’d otherwise go without. You check a compliance box. That’s a reasonable outcome for an afternoon’s worth of admin work.
