The state of Washington has enacted legislation (Senate Bill 6069) that creates a new state-run retirement program (Washington Saves). Washington Saves is set to take effect on July 1, 2027.
The details
Beginning July 1, 2027, the Washington Saves program entitles employees to contribute a portion of their pay to an individual retirement account (IRA) on a pre-tax basis to save for retirement. See the text of the law for additional details.
Note: An individual who is either unemployed or employed by a noncovered employer, and is a former Washington Saves participant, must be allowed to continue to contribute to their individual retirement account under Washington Saves, and is subject to IRA rules.
Washington Saves
Employers must automatically enroll covered employees (employees who are at least 18 years of age and who have been continuously employed for at least one year) in IRAs in alignment with Washington Saves.
Under the law, a covered employer:
- Has been in business in Washington for at least two years;
- Has a physical presence in Washington as of the immediately preceding calendar year;
- Does not offer a qualified retirement plan (401a, 401k, 403b) to covered employees; and
- Employs (and at any time during the immediately preceding calendar year employed) employees that worked for a combined minimum of 10,400 hours.
The automatic enrollment rate, set by the state, must at least meet 3%, and not exceed 7% of an employee’s compensation. Contribution rates will increase by 1% per year, up to a maximum of 10% of compensation.
Note: Employees may change their contribution amounts or opt out of contributions at any time.
Penalties
The law provides protection from certain penalties for the first several years after July 1, 2027. See the text of the law for further details.
Next steps
ADP® is currently reviewing the impact of Washington Saves on its products and services and will communicate a plan of action in the future.