Washington State Poised to Adopt State Plan

Add the Evergreen State to those that provide retirement plan coverage for private-sector employees whose employers do not. Well, soon. 

"In the beginning of March, Washington joined the 15 other states that had previously adopted state auto-IRA language, to provide the best opportunity for small businesses and their employees to prepare themselves for retirement in the future," notes NTSA Executive Director Nate Glassey. 

Sen. Mark Mullet (D-Issaquah) introduced SB 6069, the measure creating Washington Saves, on Jan. 9, 2024. The Senate passed it on Feb. 12; the House initially passed it on March 1 in a 57-39 vote, and on March 6 passed a version that incorporated Senate views on the amendments it had made. The Senate passed the amended version in a 35-12 vote on March 7. The measure now awaits the signature of Gov. Jay Inslee (D).

“A great opportunity,”  Glassey said of the measure; he added that it “was great to see” bipartisan activity on the bill. 

"State auto-IRA programs like the one that has recently passed in Washington are a perfect mix of public/private partnership that allows and encourages employers to take full advantage of the legislation found in the passing of SECURE 2.0. There has never been a better time for small businesses in America to set up a retirement plan with all of the credits provided in SECURE 2.0," Glassey continued, adding, "We are grateful to the legislators in Washington for making this choice to take great care of every working Washingtonian."

What the Bill Does 

SB 6069 establishes Washington Saves, an automatic enrollment individual retirement savings account program. It requires covered employers to allow employees an opportunity to contribute to an IRA through an automatic payroll deduction. The default contribution rate is to be not less than 3%, nor more than 7%, of wages. The program also includes automatic escalation that may not exceed 1% per year or cause the maximum contribution rate to exceed 10% of wages. Accounts are portable.

Employers. Covered employers are businesses located in Washington State for at least two years, that had employees working a combined minimum of 10,400 hours during the previous calendar year, and that do not already offer employees a qualified retirement plan. Employers are required to enroll employees who have had continuous employment for one year or more in the program at default contribution rates. 

Employers’ duties include:

• registering and providing their employees' information to the program; 
• offering their employees the choice to participate in the program or opt out; 
• timely remittance of participant contributions; 
• providing program information to employees, including specific disclosures; and 
• providing information, forms, and instructions to employees with procedures for making contributions, investment selections, transfers, rollovers, withdrawals, and other distributions from the employee's IRA.

Employees. Employees may have a say in how their account funds are invested. They also may opt out of the program. Former participants will still be permitted to contribute to their accounts.

Program Administration 

SB 6069 creates a 15-member governing board to design, develop, implement, maintain, and oversee the program. 

Board duties. The governing board must establish, design, develop, implement, maintain, and oversee the program. Its duties include: 

• contracting with and managing an investment manager; 
• adopting an investment policy and ensuring investment options offered are consistent with program objectives;
• setting a default contribution rate; 
• setting a default escalation rate; 
• determining the type of IRAs available under the program; 
• investing contributions in the default investment option unless the participant elects to invest in a different approved investment option; 
• ensuring individual accounts are portable and that former participants are still permitted to contribute to their accounts; and 
• contracting with outside firms to provide investment management and manage the performance of investment managers. 

The governing board may create or enter into a consortium, alliance, joint venture, partnership, compact, or contract with another state or states.

Board membership. The membership of the board will be: 

• one member from each of the two largest caucuses of both the Senate and the House of Representatives; 
• the state Treasurer; 
• the Director of Labor and Industries (L&I) or the director's designee; and
• members appointed by the governor, representing: (1) the securities industry; (2) the insurance industry; (3) certified financial planners recommended by the National Association of Insurance and Financial Advisors of Washington; (4) the interests of small, independent businesses in Washington; (5) the interests of minority-owned and women-owned businesses in Washington; (6) the Washington asset building coalition; (7) a retirement advocacy organization; (8) covered employees; and (9) covered employers. 

The board is responsible for contracting with outside firms to provide investment management and manage the performance of investment managers. 

Board timetable. The governing board is to begin meeting in 2025.

The governing board must submit a preliminary legislative report by Dec. 1, 2025, that includes feedback on the program's proposed timeline and progress on outreach initiatives and program implementation. 

A final legislative report on program design and implementation recommendations is due Dec. 1, 2026, that must include a comprehensive summary of outreach activities conducted, recommendations on whether the legislature should make statutory changes to the program, and recommendations on the governing board structure and staffing. It also must include recommendations regarding who should chair it once the program is operational after July 1, 2027.

Annual legislative reports on program information are to begin Dec. 1, 2028.

Timing

The program must be launched by Jan. 1, 2027, but implementation may be phased in. 

What's Next 

"The final piece to the puzzle is to nudge employers to make the choice to take advantage of this groundbreaking legislation," remarks Glassey.