Virginia lawmakers sent a bill to Gov. Ralph Northam Wednesday to create a state-sponsored retirement savings program for private-sector employees who lack access to such a plan at work, making it the 13th state to adopt a program.
Gov. Northam, a Democrat, is expected to sign the bill into law. It could provide more than half of the 1.2 million Virginia residents without a retirement savings plan at work with the option to save through payroll deductions, according to AARP, an advocacy group for older Americans and a supporter of state-run retirement savings programs. AARP says 44% of Virginia’s private-sector employees work for a company that doesn’t provide a retirement plan.
Under the Virginia plan, to be called VirginiaSaves, employers that have 25 or more full-time employees—defined as working at least 30 hours a week—and that have been in business at least two years and don’t offer a retirement savings plan would be required to automatically enroll employees in an individual retirement account, or IRA, at a percentage of pay that has yet to be determined. Employees would be able to opt out or change their savings rate.
Employers aren’t required to contribute to the accounts and aren’t considered fiduciaries, the bill says.
The measure to authorize a state-run program in Virginia passed the state’s legislature earlier this year. But the scope of the program remained unclear until yesterday, when the Senate defeated an amendment from Gov. Northam to extend eligibility to many part-time workers.