Beginning July 1, 2026, many Virginia employers that were previously exempt from RetirePath Virginia will become subject to the program’s retirement savings requirements.
The change lowers the participation threshold from 25 employees to just 5 employees, bringing thousands of smaller businesses into the program for the first time. Employers that do not offer a qualified retirement plan will generally be required to register with RetirePath Virginia and facilitate employee payroll deductions into individual retirement accounts.
For business owners, now is a good time to review whether participating in the state program or establishing a retirement plan of their own is the better fit for their workforce and long-term goals.
What Is RetirePath Virginia?
RetirePath Virginia is the Commonwealth’s state-facilitated retirement savings program. It is designed to provide employees with access to retirement savings through payroll deductions when their employer does not sponsor a qualified retirement plan.
The program is funded entirely through employee contributions. Employers do not make matching contributions and are not responsible for managing investments or administering retirement accounts.
Which Employers Will Be Required to Participate?
Beginning July 1, 2026, employers may be required to participate if they:
- Have been operating for at least two years
- Had five or more eligible employees as of December 31 of the prior calendar year
- Do not sponsor a qualified retirement plan, such as a 401(k), SEP IRA, SIMPLE IRA, or other eligible employer-sponsored retirement arrangement
Eligible employers can expect to receive notices from RetirePath Virginia with instructions and deadlines for registration.
Businesses that already maintain a qualified retirement plan remain exempt from the requirement.
Which Employees Are Eligible?
Employees generally may participate if they:
- Are at least 18 years old
- Earn wages in Virginia
As a result of the expansion, many part-time employees who were not previously covered may now become eligible for the program.
How Does Automatic Enrollment Work?
RetirePath Virginia uses automatic enrollment to encourage retirement savings while preserving employee choice.
Employees who do not make an election during the enrollment period are automatically enrolled at the program’s default contribution rate of 5% of compensation. Contributions are deposited into a Roth IRA established through the program.
Employees may opt out of participation or adjust their contribution percentage at any time.
Are Contributions Limited?
Yes. Contributions are subject to the annual IRA contribution limits established by the Internal Revenue Service.
Because IRA limits may change from year to year, employees should review current IRS guidance or consult their tax advisor regarding the limits that apply to their individual circumstances.
What Are Employer Responsibilities?
Employers participating in RetirePath Virginia are generally responsible for:
- Registering by the required deadline
- Providing employee enrollment information
- Processing payroll deductions
- Remitting employee contributions to the program
While these responsibilities are relatively straightforward, employers should ensure payroll systems and administrative processes are prepared before any registration deadlines arrive.
Should Employers Consider Other Retirement Plan Options?
For many businesses, the expansion presents more than a compliance decision.
The reduction in the employee threshold means that many small employers will be evaluating retirement benefits for the first time. While RetirePath Virginia may satisfy the state requirement, some organizations may find greater value in establishing their own retirement plan.
Depending on the employer’s goals, a traditional 401(k), SIMPLE IRA, SEP IRA, or other retirement plan may provide additional flexibility, potential tax advantages, and opportunities to support employee recruitment and retention.
The right approach depends on factors such as workforce size, employee demographics, cash flow, and long-term business objectives.
What Should Employers Do Now?
Although the new requirements take effect July 1, 2026, employers may benefit from reviewing their options well before receiving a notice from the state.
Understanding whether your organization will be affected and evaluating available retirement plan alternatives now can help avoid last-minute decisions and ensure employees have access to meaningful retirement savings opportunities.
If you have questions about how the RetirePath Virginia expansion may affect your business, YHB can help you evaluate your options and understand how retirement plan decisions fit into your broader business and workforce strategy.