Virginia could soon push more workers to save for retirement. Here’s how:

Virginia could soon push more workers to save for retirement. Here’s how:
House Budget Chairman Luke Torian, D-Prince William, speaks on the floor of the House of Delegates in 2020. (Source: Ned Oliver/Virginia Mercury)

Thousands of Virginia workers would gain the option of automatically putting away part of their paychecks for retirement under legislation the General Assembly passed last month to help private-sector employees who lack access to a savings plan through their employer.

The bill, awaiting action by Gov. Ralph Northam, establishes a state-administered program that would offer IRA accounts to workers with no other retirement plan options, particularly employees of small businesses, self-employed people and gig workers.

The accounts would be optional, but workers would be enrolled by default and would have to opt-out if they want to keep their whole paycheck. The plans would be portable, meaning workers could keep putting money into the same account even if they switch jobs.

Covered businesses would have to help interested workers participate in the program, mainly by setting up their accounting systems to allow payroll deductions to be made, but they wouldn’t have to contribute funds of their own.

The program, scheduled to take effect no sooner than 2023, would be run by the Virginia College Savings Plan’s governing board, a group of finance and investment professionals that already administers plans meant to help families build savings for higher education expenses.

Though the Democratic-led General Assembly sent the bill to the governor’s desk, they did so amid sharp disagreement over its scope, with the state Senate insisting on restrictions that proponents of the bill say could make hundreds of thousands of workers ineligible.

The Senate changes would make the program mandatory only for businesses with 25 or more full-time workers. The version approved by the House of Delegates would have applied to businesses with five or more employees, including part-time workers.

“Although I am very displeased with the restrictions, accepting this compromise is necessary to move forward with this important legislation,” Del. Luke Torian, D-Prince William, who has championed the idea for years, said near the session’s end as he encouraged the House to accept the Senate’s proposals.

Though legislators seemed open to debate over how big a business should have to be before having to participate, at least one Democratic senator said including part-time workers was a non-starter.

The Virginia Mercury is a new, nonpartisan, nonprofit news organization covering Virginia government and policy.