What happened?

On March 28, 2024, Governor Jay Inslee signed the Engrossed Substitute Senate Bill 6069, known as Washington Saves, which establishes an automatic Individual Retirement Account (IRA).

What are the details?

Key Bites:

• The bill aims to enhance retirement security in Washington by introducing an automatic enrollment individual retirement savings account program, known as Washington Saves, and updating the Washington retirement marketplace statute.

• Washington Saves will establish an automatic Individual Retirement Account (IRA) system for employees who do not have access to employer-based retirement systems.
  • Most employers will be covered since they do not offer a retirement plan. They will be required to automatically enroll their workers in this state-administered retirement savings plan.
  • Employees automatically enrolled will have a payroll deduction for their individual retirement account at a default contribution rate set by a 15-member governing board.
  • The initial default contribution rate is between 3% and 7%; a default escalation rate of not more than 1%, and a maximum default rate of 10%.

• The funds will be professionally invested, providing a portable, automatic retirement savings account for every Washingtonian.

• Workers will have the flexibility to determine their contribution rates and have the option to opt out.

• Employers will be required to register with the state, promptly forward employees’ payroll deductions, and provide notices to employees.

• The accounts are portable, allowing workers to continue contributing even when they change jobs.

• The bill serves as a vehicle for covered employees to voluntarily provide additional retirement security through a state-facilitated retirement savings program.

• The program is intended to be a public-private partnership that encourages, rather than replaces or competes with, employer-sponsored retirement plans.

• Employers are prohibited from making contributions to Washington Saves. Nevertheless, the current retirement marketplace for small businesses in Washington will persist in providing optional avenues for employers to contribute to retirement funds. The legislation adjusts this marketplace by eliminating mentions of payroll deductions for individual IRAs, which will henceforth be provided via Washington Saves.

Business Considerations

• Employers should familiarize themselves with the new program and its implications, including understanding the changes to the Washington Retirement Marketplace statute.
• Employers should consider communicating with their employees about the program, including explaining the automatic enrollment process, the default contribution rate, and the option for employees to opt-out or adjust their contribution rates, or at least orient them to seek guidance.
• Employers will need to register with the state for the Washington Saves program. It is important to understand the registration process and ensure all necessary steps are taken so it can be done in an organized manner.
• Employers will be responsible for promptly forwarding employees’ payroll deductions to the state-administered retirement savings plan, so they should ensure they have systems in place to manage these deductions accurately and efficiently.
• Employers should ensure they comply with all aspects of the new legislation. This includes not making contributions to Washington Saves, as this is prohibited under the new law.
• Employers should first consider the current retirement marketplace for small businesses in Washington, as they are still able to make contributions to retirement funds there, despite being prohibited from contributing to Washington Saves. Exploring these options and offering these additional benefits to their employees is highly recommended.

Source References

• WA SB 6069 / HB 2244
• Washington State Treasurer Press Release

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