NYCPA News and Blogs

State Retirement Mandates Create New Compliance Challenges for Small Businesses 

With more states requiring retirement savings programs, Accounting Today reports that small business owners now have new rules to follow, and ignoring these requirements could lead to serious penalties. 

State-run auto-IRA programs are designed to help people save for retirement. If employers do not already offer a qualified retirement plan, they must either sign employees up for the state program or create their own. By the end of 2026, 19 states and several cities, such as New York, Seattle, and Philadelphia, will have these rules in place. 

The rules vary depending on the state. In California, Oregon, and Hawaii, even businesses with only one eligible employee may need to offer a retirement savings plan. In other states like Colorado, Connecticut, Delaware, Maine, Minnesota, and Virginia, the requirement usually starts with businesses that have five or more employees. 

New York’s Secure Choice Savings Program is now being enforced, and the deadlines for compliance depend on how many employees a business has. Companies that do not follow the rules may face increasing penalties if they keep violating them. 

Many employers pick state-sponsored plans because they do not cost anything and are simple to manage. Still, advisors suggest looking at private options like 401(k)s, SEP IRAs, and SIMPLE IRAs. Thanks to the SECURE 2.0 Act, some small businesses can get federal tax credits to help cover the costs of starting a plan and making employer contributions.