Virginia could soon have a private-sector retirement savings program, through legislation passed by the Virginia House of Delegates on Jan. 26.
Approved by a vote of 56-44, the legislation sponsored by Del. Luke Torian, D-Prince William, chairman of the House Appropriations Committee, was referred to the Senate Committee on Finance and Appropriations.
House Bill 2174 would establish an automatic enrollment payroll deduction individual retirement account through the Virginia College Savings Plan, Virginia 529. It would be administered by a separate 11-member board setting default contribution rates and procedures for enrollment, withdrawals and compliance, and making investment decisions.
The legislation calls for the program to start enrolling eligible employers no later than July 1, 2023.
Participation would be mandatory for employers in business for two or more years and with at least five employees without access to a workplace retirement plan. Other employers would also be eligible. Employees, whose benefits would be portable to eligible employers, could opt out of the plan. Employers would not be considered fiduciaries.
An impact statement filed with the bill cites a "cost of doing nothing" study by Econsult Solutions, Inc. that estimated inaction would cost Virginia taxpayers $11.8 billion over the next 15 years, due to a lack of retirement preparedness. Nearly two million Virginians are not covered by an employer-sponsored retirement plan.
In 2020, Virginia529 studied the feasibility of a mandatory private-sector IRA program. The final report filed in December, cites research by The Pew Charitable Trusts that showed about 55% of working Virginians had access to an employer-sponsored retirement plan, but only 44% participated. The report estimated startup costs at $1.3 million and annual operating costs of $1.2 million for the recommended auto-IRA model. Based on implementation and participation rates in states with active programs, the program would be cash-flow positive in 10 years. "As with any new program, time is required for outreach and education," the report said.
Mr. Torian is hopeful that the bill will be signed into law this session. It is supported by Gov. Ralph Northam, AARP Virginia, Small Business Majority and The Pew Charitable Trusts. “This is an opportunity for all Virginia workers to build long-term savings not tied to a single employer. I am hopeful that Virginia529 can do for retirement planning what it did for college savings,” he said in a statement.