Vermont to offer a state-run retirement savings program

Vermont has joined the growing number of states stepping in to help private sector workers without access to workplace retirement plans.

On Thursday, Vermont Governor Phil Scott signed a bill establishing a state-run retirement savings program for workers whose employers don’t offer a workplace plan.

The legislation, which was passed by the Senate on April 16 and by the House on May 11, will require employers with five or more employees to enroll their workers in the VT Saves program or face penalties.

The program is structured as an automatic IRA, meaning employees will be automatically enrolled in a payroll deduction individual retirement account. VT Saves will automatically enroll workers at an initial 5% deferral rate but will give them the option to opt out of the program or contribute at higher or lower rates.

Employers with 25 or more employees will be required to offer VT Saves by July 1, 2025. Those with 15 to 24 employees must make the program available by Jan. 1, 2026, and those with five to 14 employees must do so by July 1, 2026.

Employers that fail to meet these deadlines face penalties ranging from $10 to $75 per employee.

Vermont joins 13 other states that have established — or enacted legislation to establish — similar auto-IRA programs. The three largest programs — CalSavers in California, Illinois Secure Choice and OregonSaves — have accumulated more than $816 million in assets as of April 30, according to information on their websites.

Such programs can make a big difference for financially vulnerable people without sufficient retirement savings, according to the Pew Charitable Trusts, which commissioned a report assessing the impact of insufficient savings on state and federal budgets.

The report found that insufficient retirement savings could cost state and federal governments $1.3 trillion over the next 20 years to fund public assistance programs for financially vulnerable retiree households. In Vermont, the state costs were projected to eat up $782 million, while federal costs would devour $1.8 billion.