Which state-compliant retirement plan is the best fit for your business?

Which state-compliant retirement plan is the best fit for your business?


Social Security, which was designed to only replace a portion of workers’ pre-retirement earnings, provides most of the retirement income for an alarmingly high amount of households aged 65 and older in the United States—about half [1]. Potentially even more distressing is that more than a third of American’s don’t have anything saved for retirement [2], and something needs to be done about it.

Kudos to the state governments for stepping up and providing solutions (via state mandated retirement plans) for their workers, but a Roth IRA alone isn’t going to mean that a saver is retirement ready, and it certainly is not going to benefit a business owner as much as a 401(k) plan. 

The map below shows the progress each state has made with legislation for state retirement programs.

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Are Roth IRAs actually free?

The state mandates are offering a Roth IRA that is essentially “free of charge” to the employer, but “free” isn’t always better. It’s also never truly “free.” With these Roth IRAs, many employees, and some business owners or other highly compensated employees, are prohibited from participating in the program due to income restrictions. This puts employers in a real pickle—if they choose the state plan, they may preclude themselves or other employees from participation.

While the state mandates move the needle forward in terms of coverage, there remains the need to push forward in retirement readiness. States are trying to develop cost competitive programs to serve high numbers of participants in small employer groups, but they are leaving out engagement in outcomes and local representation. Driving engagement through designed disengagement has never been a strategy for success, and the state options are designed to cater to the disengaged.   

What’s the best retirement savings vehicle for you?

Before you settle for a state compliant “free” Roth IRA, you should understand the differences between all of the options at your disposal and select the plan that will best enable you and your employees to meet their retirement goals. Taxation and contribution limits are just the tip of the iceberg. The path to retirement readiness requires beginning with the end in mind. If employers have to do something to comply with the state, why not do something that benefits them as a business owner and still provides a great benefit for their employees?

A 401(k) service like PAi’s CoPilot, allows you to provide retirement readiness to more participants than a retirement product. Smart plan design, thoughtful default features, and access to different share classes can help improve coverage and close the retirement savings gaps.

CoPilot is a solution that engages with participants on their retirement journey, making it easier to understand how many years of retirement they are projected to have saved and alerting them about any decisions that impact their retirement. CoPilot makes it easy for participants to own their retirement readiness and allows plan sponsors to easily and confidently provide a diverse alternative to the state-run plans.

Let’s start the conversation about how CoPilot can help you navigate increasingly complex retirement savings program legislation and meet participant’s needs. Contact us to learn more, or give us a call today: 800.236.7400.


Michael Kiley, Founder and CEO