RetirePath VA - Virginia State-Sponsored Retirement Plan

Explore RetirePath VA – a comprehensive guide that sheds light on the strategies, benefits, and considerations for ensuring a smooth journey to retirement. Dive in to make informed decisions for a secure future!
Author: Penelope Team
RetirePath VA - Virginia State-Sponsored Retirement Plan

RetirePath VA is a state-sponsored retirement savings program for eligible Virginia workers. Employees are automatically enrolled in a Roth IRA, but savers can choose to redirect their contributions to a traditional IRA.

Other states launched state-facilitated retirement savings programs before Virginia. They are Oregon (2017), Illinois (2018), California (2019), Connecticut (2021), Maryland (2022), and Colorado (2022). Find out more about state retirement plan mandates.

Many Virginians working in the private sector don’t have access to an employer-sponsored retirement savings plan. To help give these people a path to economic security, the state government created RetirePath Virginia.

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How does RetirePath VA work?

RetirePath VA is a Roth Individual Retirement Account (IRA). Participating employees contribute to it via post-tax payroll deductions, which are automatically processed by their company. 

If you join a company that is enrolled in RetirePath VA, you will be automatically enrolled within the first 30 days, unless you opt-out. You can re-enroll and opt-out at any time.

The default contribution rate is 5%, but you can change it whenever you choose. Employees can contribute as much as they wish, up to the IRS limits (in 2023, that’s $6,500, $7,500 for people over 50). If plan participants don’t make changes to their contribution limits, each year they will increase by 1%, until reaching 10%.

RetirePath Virginia does not offer an employer-match — employers are not permitted or required to contribute. Employers also don’t have to pay fees to set up the plan, which makes it an affordable option for companies in Virginia.

Rollovers from a RetirePath account directly to another type of IRA are tax free and not subject to penalties, as long as you stick to one transfer per year.  

What if my small business or nonprofit organization is already offering a retirement plan?

If you do business in Virginia and already provide a retirement plan to your employees, you are exempt from RetirePath. You’ll still need to certify your plan with the state.

Which employees are eligible to participate in RetirePath VA?

RetirePath VA is open to employees who are 18 or older, work at least 30 hours per week, and earn taxable wages from a Virginia-based employer. Their modified adjusted gross income (MAGI) cannot exceed the IRS limits for contributing to a Roth IRA.

What are the benefits of RetirePath VA?

RetirePath VA can be a good option for small businesses, as they don’t have to match employee contributions and pay no fees. The administration is easy and integrates with payroll systems.

Employees can opt-out for other retirement plans, and it’s advisable to study all possible options before enrolling in RetirePath VA. 

Disadvantages of RetirePath VA for employees

While RetirePath VA is an affordable option for small business owners, it does have some disadvantages for employees:

  • Limited investment options, compared to other retirement plans
  • No employer match
  • The employee fees are considered high in the industry

Just as with other state-mandated retirement plans, RetirePath VA works if you don’t have a better option. As a small business or a nonprofit organization, it’s important to look at all possible alternatives and choose the best.

Retirement plans are used as a great “hook” by companies to attract and retain excellent employees and Penelope has a solid offer of 401(k) plans to choose from. 

Get a better alternative for the RetirePath Virginia Plan

Would you like to offer your employees affordable and straightforward 401(k) retirement plans? Find Out More.

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