Seyfarth Synopsis: On March 28, 2024, Washington State's Governor, Jay Inslee, signed into law a bill that creates a new state-run retirement program called "Washington Saves." Under the program, "covered employers" must give "covered employees" the opportunity to contribute a portion of their pay to an individual retirement account ("IRA") on a pre-tax basis in order to save for retirement.

Which Employers Must Comply With Washington Saves?

Only "covered employers" must comply with Washington Saves. A "covered employer" is an employer that:

  • has been in business in Washington State for at least two (2) years;
  • has a physical presence in the State as of the immediately preceding calendar year;
  • does not offer a qualified retirement plan, such as a 401(a), 401(k), 403(b) plan, to their "covered employees" (employees who are at least age 18) who have been continuously employed for at least one year; and
  • employs, and at any point during the immediately preceding calendar year employed, employees working a combined minimum of 10,400 hours (which translates to approximately 5 full-time or full-time equivalent employees.)

How Do Covered Employees Participate?

Covered employees will be automatically enrolled by their employer in IRAs pursuant to Washington Saves. The automatic enrollment rate will be set by the State, but cannot be less than 3%, nor more than 7%, of compensation. Contribution rates escalate annually at 1% per year, up to a maximum of 10% of compensation. Employees may elect a different contribution percentage or to opt out of contributing at any time.

How Are Contributions Invested?

Contributions will be invested in a default investment option chosen by the State, unless the employee affirmatively elects to invest their account balance in a different investment option(s) offered under the program. An employee will have the opportunity to change investments for either future contributions or existing balances, or both.

Are Washington Saves Accounts Portable?

Yes. A former participant who is either unemployed, or is employed by a noncovered employer, must be permitted to continue to contribute to their individual retirement account under Washington Saves, subject to the rules applicable to IRAs.

Who Administers Washington Saves?

A governing board of at least 12 individuals named by the State will be responsible for designing and administering Washington Saves. The program will comply with the rules for IRAs set forth in the Internal Revenue Code.

When Is Washington Saves Effective?

The program will be launched by July 1, 2027. The governing board may stagger implementation in stages after that date, which may include phasing in implementation based on the size of employers, or other factors.

With adoption of this program, Washington is the latest in a growing list of states with mandated auto-enrollment retirement programs for smaller employers. See our earlier post on New York State's program and others here.

As always, if you have any questions on how this impacts you, please do not hesitate to reach out to your Seyfarth Employee Benefits attorney.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.