Unlock Your Future: Vermont’s Exciting New Retirement Program Revealed!

Exciting news for Vermont workers! The Treasurer’s Office has just launched a groundbreaking program aimed at helping small businesses provide their employees with a path to a secure financial future. This is your chance to take control of your retirement savings!

Introducing Vermont Saves – a revolutionary retirement savings initiative that functions like an employer-sponsored individual retirement account (IRA), featuring automatic payroll contributions akin to a traditional 401(k).

State Treasurer Mike Pieciak revealed that around 80,000 to 100,000 workers in Vermont currently lack access to retirement accounts through their jobs. This innovative program, established by law in 2023, aims to change that by making workplace-based retirement plans accessible, particularly for smaller employers.

Organizations with a minimum of five employees who do not yet offer retirement options are required to enroll in Vermont Saves by February. But it gets even better! Self-employed Vermonters can also join the program independently, allowing more individuals to secure their financial future.

“Research shows you’re 15 times more likely to save for retirement if you have a workplace retirement plan,” Pieciak emphasized in a recent interview. “While some may view the barriers to accessing a Roth IRA as minor, they can be significant enough to exclude many from the retirement savings landscape.”

To participate, individuals must be at least 18 years old and have logged a minimum of 500 hours of taxable wages from a Vermont employer. Those enrolling independently must also provide their bank account information. However, Pieciak acknowledged that some workers, including undocumented individuals, may unfortunately still be ineligible. Yet, most of those without retirement options are simply employed by small businesses or nonprofits that can’t bear the administrative costs of offering a retirement plan.

Vermont is not alone in this endeavor; it has partnered with Colorado, Delaware, and Maine to form the Partnership for a Dignified Retirement, aiming to slash administrative costs while enhancing access to retirement savings.

Curious about what this program offers? You’ll find answers to your questions in the FAQ section of the Vermont Saves website.

What Sets Vermont Saves Apart from Other Retirement Accounts?

Unlike standard employer-based retirement programs, like 401(k) plans that let employees automatically allocate a portion of their income into investment accounts, Vermont Saves accounts mimic Roth IRAs but with an essential twist: they allow for seamless automatic payroll deductions.

For many Vermonters, this could mean lower fees compared to traditional IRA providers and the comfort of a state-backed system. Becky Wasserman, the director of economic empowerment at the Treasurer’s Office, highlights this unique value proposition.

How Does the Program Work for Employers?

Good news for employers: the Vermont Saves program comes at no cost to you! Simply register your organization, and coordinate with your payroll provider on how to facilitate contributions.

For first-time enrollees, the program automatically deducts 5% of wages, increasing to 8% over several years. Employees can adjust their contributions to fit their financial needs, up to the federally mandated IRA contribution limits.

According to Pieciak, the default amounts were selected to strike a balance between ensuring a sustainable retirement income and maintaining daily financial stability. “It’s a manageable amount that will impact their future retirement without compromising their current living situation,” he noted.

If an employee decides to leave their job, their Vermont Saves account stays with them, just like a typical bank-based IRA. They can also withdraw their original contributions before retirement, though any investment returns will be subject to taxes.

What Investment Options are Available?

The program is managed by Vestwell State Savings, a nationwide provider, with investment options overseen by industry giants State Street and BlackRock. Participants can choose from four investment avenues: a capital preservation fund, a bond index, an international equity fund, and a “target retirement date” fund that automatically adjusts its investment mix based on the planned retirement date.

While typical IRA accounts often allow for more detailed investment control, Pieciak believes the streamlined options here help prevent participants from feeling overwhelmed. “We wanted to keep it simple to empower decision-making,” he explained.