Governor of Washington Jay Inslee signed into law today a bill that would create the state’s first-ever automatic individual retirement account (IRA) program.
Starting January 2027, the new legislation will offer retirement savings to full-time and part-time private-sector workers who do not have retirement coverage in Washington state. Specifically, employees will be able to contribute between 3% to 7% of wages and will have an automatic escalation feature of 1% every year. The cap on contributions will be 10% of wages.
According to a fact sheet on the program, eligible workers would be automatically enrolled in the program and have a percentage of their paycheck invested on their behalf. Accounts will be portable and while employees can access their savings for “emergent and exempted needs,” they will be able to withdraw funds starting at age 59.5.
Payroll contributions are not mandated, and participants can halt or pause their contributions at any time.
Covered employers include businesses located in Washington for at least two years and who have had employees working a combined minimum of 10,400 hours in the previous calendar year. These organizations must not already offer a qualified retirement plan, and will be required to enroll employees who have had continuous employment for at least one year.
The legislation, otherwise known as 6069, marks Washington as one of the many states to now provide auto-IRAs for employees. The Evergreen state now joins the likes of Colorado, Maine, Delaware, New Jersey, Vermont, Nevada, and others who have all implemented IRAs to employees without retirement plans.
Currently, 1.2 million—or 43%— of all workers in Washington lack access to retirement coverage, found a Pew Charitable Trusts study that analyzed the costs of insufficient retirement savings in the state. If not remedied, a lack of retirement savings could cost Washington $3.9 billion from 2021 to 2040 as workers depend on public assistance programs and state benefits to fund their retirement.
Automated savings programs could curtail this from happening, adds Pew. Access to savings opportunities from seven states alone has helped over 800,000 workers hit $1 billion in retirement assets over the past six years.
SEE ALSO:
- Delaware the Latest to Offer State Auto-IRAs
- 3 More States Advance Auto-IRA Programs
- New Jersey Selects Vestwell to Administer Latest State Auto-IRA
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
