Vermont is now among the states providing a state-run plan for private-sector employees whose employers are not. Gov. Phil Scott (R) has signed into law the measure that called for the creation of their iteration.
On June 1, Scott signed S. 135, the bill that creates VTSaves. Action on the legislation came rapid-fire: It was introduced on St. Patrick’s day and less than three weeks later, the Senate passed it unanimously; the House passed its version on May 9. The Senate approved a reconciled version on May 11.
What the New Law Does
VTSaves will be an auto-IRA program, through which payroll deductions will be contributed to an IRA. Contributions will be made to a Roth IRA; however, the state Treasurer has the authority to add an option for all participants to elect to contribute to a traditional IRA instead of a Roth.
Employers that do not already have a workplace retirement plan will be required to sign up. The requirement will be phased in by the following schedule:
- Beginning July 1, 2025, all covered employers with 25 or more covered employees must offer the program to all covered employees.
- Beginning Jan. 1, 2026, all covered employers with 15-24 covered employees must offer the program to all covered employees.
- Beginning July 1, 2026, all covered employers with 5-14 covered employees must offer the program to all covered employees.
Employees of covered employers will be enrolled in a Roth IRA with automatic payroll deductions. The initial contribution rate will be 5% of an employee’s salary or wages, but the Treasurer could require an annual increase of each active participant’s contribution rate, by not less than 1%, but not more than 8%, of salary or wages each year.
Employees will have the ability to:
- adjust their contribution rates;
- roll over the funds in their accounts into other IRAs or other retirement accounts; and
- opt out of the program.
The new law takes effect July 1, 2023.