Navigating Retirement State Mandates: Implications for Franchises

State mandates across the country are reshaping the landscape of retirement, presenting both challenges and opportunities for franchises. Since 2012, 47 states have either implemented a state-based retirement savings program, studied program options, or considered legislation. As of February 2024, there are 19 states that have either passed laws or have pending legislation that outlines new programs for private-sector workers. Of that number, nine states have active laws. 

How do state-mandated retirement programs work?

The majority of state-sponsored plans are Roth IRAs, which have a different set of factors to compare with an employer sponsored 401(k):

• 401(k)s can be pre-tax while Roth IRAs are often post-tax
• 401(k)s have a higher annual contribution limit compared to Roth IRAs
• In 2024, 401(k) contribution limits are $23,000 ($30,500 for those older than 50); while IRA contribution levels are $7,000 ($8,000 for those older than 50)
• Roth IRA’s have an adjusted gross income (AGI) limitation that may not allow certain highly paid individuals/owners to participate

For more information: IRA vs Roth IRA vs 401(k): What’s the difference?

What are the regulations for state-mandated retirement programs?

Franchises operating in states with mandated retirement programs must ensure compliance with the regulations set forth by the state government. Oftentimes there are fines for companies that don’t comply by a certain date. There are currently nine states with active programs and the following states have deadlines that have already passed: California, Colorado, Connecticut, Illinois, Maine, and Virginia. The complexity of these compliance measures can vary from state to state, adding an additional layer of intricacy for franchises with a nationwide presence.

The upside to offering a retirement plan to your employees

Despite the challenges, providing retirement benefits, whether mandated or voluntarily, enhances the attractiveness of employment with a franchise to prospective employees. A robust benefits package, including a retirement plan, can attract top talent and foster employee loyalty.

In fact: 

• 78% of employees rated a retirement plan as a “must have” benefit.1
• With a 40% lower chance of employees quitting by the end of their first year if their employer offers a 401(k).2

Administrative work to consider with the state option

Managing a state-sponsored retirement plan may add to the administrative burden for franchises. With multiple locations across different states, ensuring proper implementation and ongoing management of the plan is important. This is where exploring retirement plan provider alternatives, like Human Interest, to the state option can help. Human Interest has integrations with 450+ payroll providers which helps automate the administrative work that comes along with administering a plan. 

In conclusion, state mandates, particularly in retirement planning, have significant implications for franchises. While compliance may present challenges, franchises that navigate these mandates effectively can retain and attract talent, and contribute to the financial security of their workforce. If you’re interested in learning about the status of mandates in your state or what your options are, you can book time with a 401(k) specialist at Human Interest here.

1  MetLife Redesigning the Employee Experience: Preparing the Workforce For a Transformed World: (2021)
2 Gusto, 2022 blog; accessed 4/3/2023 

Human Interest Inc. is an affordable, full-service 401(k) and 403(b) provider that seeks to make it easy for small and medium-sized businesses to assist their employees with investing for retirement. For more information, please visit humaninterest.com.

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Human Interest
Human Interest is a modern and affordable 401(k) and 403(b) solution for small and medium-sized businesses. Our mission is to ensure people in all lines of work have access to retirement benefits. Learn More