Everything You Need to Know About The Vermont Saves Program

Vermont has enacted a law requiring employers without workplace retirement savings plans to automatically enroll their employees in the VT Saves “auto-IRA” program starting in July 2025. Many employers in other states with similar programs have taken the opportunity to initiate their own company-sponsored 401)k) plans. Here's everything you need to know.

Earlier this year we published a blog post on the The Maine Retirement Investment Trust (”MERIT) program, and auto-IRA retirement savings plan designed as a solution to working Mainers who don’t have access to a workplace retirement savings program. Vermont also passed similar legislation in June of this year, enabling the VT Saves program.

What is VT Saves Program?

Vermont’s Governor, Phil Scott, signed the VT Saves program into law on June 1, 2023. Similar to the programs available in other states, VT Saves is an auto-IRA program which will automatically enroll Vermont workers whose employers do not offer a workplace retirement savings program into a Roth (after-tax) IRA.  Employers will automatically deduct contributions on an after-tax basis from worker’s paychecks, depositing the deductions into designated account. The state treasurer, however, has the authority to add the option for a Traditional IRA.

The program is designed to “transform the long-term well-being of thousands of Vermonters” according to state treasurer Mike Pieciak. (VT Saves Signed into Law, Treasurer’s Initiative Will Provide Retirement Saving Plan to Tens of Thousands of Vermont Workers, Press Release – Office of the State Treasurer, June 6, 2023)¹

Employer Requirements

The VT Saves plan will be phased in starting mid-year 2025.

Covered employers must auto-enroll their employees into the program. The phase-in dates are as follows:

The initial employee contribution rate is 5% of salary; it appears the program will also feature an automatic annual savings increase of 1% of salary up to a maximum of 8%.

Employer contributions are not required.

Employee Options

Employees will be automatically enrolled in the VT Saves program at a 5% after-tax contribution rate. However, they have the ability to either increase or decrease this rate, or opt-out of the program completely.

Enrolled employees will also be able to choose from a number of investment options including a default investment vehicle such as a target date fund, a limited number of other investment alternatives which are to include a principal preservation fund.

What’s Next?

VT Saves was just enacted this year, and many details will continue to evolve between now the summer of 2025 when the first employers will be required to enroll their employees in the program. We will monitor the program’s developments and will share key updates as they become available.

Is VT Saves the best solution for your business and employees?

We support the efforts Vermont and the state legislatures which have taken action to improve the retirement security of our nation's workforce. For Vermont employers, VT Saves is a simple, low-cost step in this direction. However, like other state-mandated programs, VT Saves is generally less flexible and customizable to fit your employees' needs.

Now may be the time for employers to consider setting up a company-sponsored retirement plan solution with the assistance of a retirement plan adviser like OneDigital.  In fact, as other states have enacted similar auto-IRA programs, many employers have done just that…started their own programs with features more valued by employees and which help with both recruiting and employee retention.

If you are interested in learning more about what your options are to set up your own company’s retirement plan that would allow you to forgo the VT Saves program, as well as learn about the benefits of working with a retirement plan advisor, please connect with your OneDigital team!

¹https://www.vermonttreasurer.gov/press-releases/vt-saves-signed-law-treasurers-initiative-will-provide-retirement-savings-plan-tens

Investment advice is offered through OneDigital Investment Advisors LLC, an SEC-registered investment adviser and a wholly-owned subsidiary of OneDigital.