Navigating Retirement Plan Compliance Amid 21 States Auto-Enrollment Mandates

The landscape of retirement planning is shifting rapidly as 21 states introduce auto-enrollment mandates for retirement plans. These new rules require employers to automatically enroll eligible employees in retirement savings programs unless they opt out. This wave of legislation is creating a surge in demand for retirement plan consulting services, as businesses strive to meet compliance deadlines and avoid penalties. For benefits consultants, payroll professionals, HR managers, retirement plan advisors, and compliance specialists, understanding the nuances of these mandates is essential to guide clients and organizations effectively.

Understanding the Scope of State Retirement Mandates 2025

By 2025, many states will have implemented their own versions of retirement plan auto-enrollment laws. These mandates vary in terms of employer size thresholds, plan types, and enrollment requirements. For example:

• California’s CalSavers program requires employers with five or more employees to offer a retirement savings option.

• Illinois Secure Choice targets employers with 25 or more employees.

• OregonSaves applies to employers with at least one employee.

  
  

These programs typically require employers to automatically enroll employees at a default contribution rate, often around 5% of wages, with the option for employees to adjust or opt out. The goal is to increase retirement savings participation among workers who might otherwise delay or avoid enrolling.

Employers must act quickly to understand their obligations under these state laws. Failure to comply can result in fines and damage to employer reputation. This urgency is driving a boom in retirement plan consulting as businesses seek expert guidance.

Key Compliance Challenges for Employers

Meeting the requirements of multiple state mandates can be complex, especially for companies operating in several states. Some of the main challenges include:

• Tracking varying deadlines and thresholds: Each state sets its own timeline and employer size criteria.

• Integrating with existing 401k plans: Employers with existing plans must determine if they meet state standards or if adjustments are needed.

• Managing employee communications: Clear notices about auto-enrollment, opt-out rights, and contribution changes are legally required.

• Handling payroll system updates: Payroll must be configured to deduct contributions accurately and report them properly.

  
  

These challenges highlight the importance of specialized retirement plan consulting to navigate the regulatory maze and ensure smooth implementation.

The Role of SECURE 2.0 Compliance in State Mandates

The federal SECURE 2.0 Act, passed in late 2022, introduced several provisions to improve retirement savings access and plan administration. While SECURE 2.0 is a federal law, its provisions interact with state mandates in important ways:

• It encourages automatic enrollment and escalation features in retirement plans.

• It expands access to pension-linked emergency savings accounts, allowing employees to build short-term savings alongside retirement funds.

• It provides safe harbor rules that can help employers meet compliance requirements.

  
  

Employers and advisors must understand how SECURE 2.0 complements or complicates state mandates. For example, integrating pension-linked emergency savings with auto-enrollment plans can improve employee financial wellness but requires careful plan design and communication.

Practical Steps for Employers and Advisors

To stay ahead of the compliance curve, employers and their advisors should take these steps:

• Conduct a compliance audit: Review current retirement offerings against state mandates and SECURE 2.0 provisions.

• Engage retirement plan consultants early: Experts can help interpret laws, design compliant plans, and manage implementation.

• Update payroll and HR systems: Ensure systems can handle auto-enrollment deductions and reporting.

• Develop clear employee communications: Use plain language to explain enrollment, contribution rates, and opt-out options.

• Monitor ongoing compliance: Track changes in state laws and federal regulations to adjust plans as needed.

  
  

For example, a mid-sized company operating in California and Oregon might work with a consultant to integrate CalSavers and OregonSaves requirements into their payroll system while aligning with SECURE 2.0’s emergency savings options. This proactive approach reduces risk and improves employee satisfaction.

Why Retirement Plan Consulting is More Important Than Ever

The complexity of managing multiple state mandates alongside federal regulations creates a strong demand for retirement plan consulting. Consultants bring value by:

• Simplifying compliance through expert interpretation of laws.

• Designing plans that meet legal requirements and employee needs.

• Coordinating between payroll, HR, and benefits teams.

• Providing training and resources for ongoing compliance.

• Helping employers leverage retirement plan auto-enrollment to boost participation and savings rates.

  
  

Consultants also help employers avoid costly penalties and reputational damage. Their expertise ensures that retirement plans are not only compliant but also effective tools for employee financial security.

Looking Ahead: Preparing for the Future of Retirement Compliance

As more states consider adopting auto-enrollment mandates, the trend toward mandatory retirement savings programs will likely continue beyond 2025. Employers should view compliance as an ongoing process, not a one-time event. Staying informed about legislative changes and evolving best practices will be critical.

Additionally, innovations like pension-linked emergency savings accounts will become more common, blending retirement and short-term savings to meet diverse employee needs. Employers who embrace these changes early will gain a competitive advantage in attracting and retaining talent.