The Washington Saves law, enacted by Governor Jay Inslee on March 28, 2024, is set to revolutionize retirement savings for workers across the state. Slated for implementation by July 1, 2027, the legislation applies to employers that do not currently offer a retirement plan, have been in business for at least two years, and employed workers for a combined 10,400 hours in the previous year. Those that meet these qualifications will be required to enroll their employees that have been continuously employed for more than a year and are 18 years of age or older in a state-managed, auto-IRA program. Employers are not required to contribute to the plan but must facilitate automatic payroll deductions or face yet-to-be-defined penalties.

This initiative is designed to extend retirement savings opportunities to approximately 1.2 million private-sector employees, representing about 43% of the state's workforce, who do not have access to employer-sponsored retirement plans. Employees will be automatically enrolled with a default contribution rate of 3-7% of their wages, with an annual 1% increase until it reaches 10%. However, employees can adjust their contribution rates or opt out at any time.

To comply, businesses need to prepare by understanding the enrollment process, updating their payroll systems for deductions, and communicating these changes to their employees. Although specific penalties for non-compliance have not been detailed, the Washington State Employment Security Department is authorized to establish rules and penalties to enforce participation.

This proactive approach aims to reduce the future financial burden on public assistance programs, with projected savings for Washington taxpayers estimated at $3.9 billion over 20 years. The broad coverage and flexible features offer a substantial benefit to the workforce, ensuring that more workers can accumulate savings for their retirement. However, employers need to be aware that this will impact their payroll processing, since they will be required to enroll their qualifying employees in the program.

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