A new state law takes effect July 1, 2026. If you have five or more eligible employees and don’t sponsor a retirement plan, the rules now apply to you.
For the past two years, Virginia’s RetirePath mandate sat far enough away that most small business owners didn’t have to think about it. The requirement applied only to employers with 25 or more employees. As of July 1, 2026, that changes. A new state law signed earlier this year lowers the threshold from 25 eligible employees to five. An eligible employee is someone age 18 or older who works 30 or more hours per week and earns wages in Virginia. Tens of thousands of Virginia businesses that were exempt last month are now in scope.
If you already offer a qualified retirement plan, this is largely a non-event for you, and that’s worth knowing. If you don’t, you have a decision to make, and a little time to make it well rather than under pressure.
Here is what changed, who it affects, and what your options are.
What RetirePath is
RetirePath Virginia is the Commonwealth’s state-facilitated retirement savings program. It was created to give private-sector workers a way to save for retirement through automatic payroll deductions when their employer doesn’t sponsor a plan of its own.
The mechanics are straightforward. Eligible employees are automatically enrolled and contribute a percentage of their pay, after tax, into a Roth IRA held in their name. The default contribution rate is 5% of compensation, and if an employee takes no action it rises by 1% each year until it reaches 10%. An employee who does not want to participate must complete an opt-out form, and must do so within 30 days of being enrolled. The account belongs to the employee and is portable, theirs to keep even if they change jobs. Employers don’t contribute, don’t match, and don’t take on fiduciary responsibility for the investments. The Commonwealth administers the accounts and communicates directly with employees; the employer’s role is limited to facilitating payroll deductions, keeping employee records current, and making the opt-out form available.
One practical point that’s easy to overlook: because employees can only avoid the withholding by opting out within that 30-day window, employers who facilitate RetirePath should build the opt-out form into their HR process, both for new hires at onboarding and as an annual step for existing staff. If you don’t institute the mandated withholding by adopting a plan of your own instead, this administrative step is part of what you’re taking on.
For a business that wants to satisfy the requirement with minimal administrative effort, that simplicity is the program’s main appeal.
What changed on July 1, 2026
Three points matter:
- The employee threshold dropped from 25 to five. The count is based on eligible employees, meaning those age 18 or older who work 30 or more hours per week.
- The two-year rule still applies. The mandate reaches businesses that have operated for two or more years.
- The exemption still applies. Employers that already sponsor a qualified plan, such as a 401(k), SEP IRA, or SIMPLE IRA, are not required to use RetirePath. They simply confirm their existing plan.
In plain terms: if you have five or more eligible employees, you’ve been in business at least two years, and you don’t currently offer a retirement plan, you are now required either to register for RetirePath or to put a qualifying plan of your own in place.
The Commonwealth is notifying newly eligible employers directly. Those notices include an access code, instructions, and a deadline. If you receive one, it isn’t junk mail, and it isn’t optional.
What happens if you do nothing
Noncompliance carries a financial penalty assessed per eligible employee, per year. The penalty structure has changed as the program has matured, and the figure that applies to your business depends on timing and your specific circumstances. Rather than cite a number that may be out of date by the time you read this, we’d point you to the current penalty details on the official program site, RetirePathVA.com, and we’re glad to walk through what it means for your headcount specifically.
The more important point is a practical one: paying a per-employee penalty year after year, while still not offering your team a benefit, is rarely the outcome anyone actually wants. Both registering for RetirePath and starting a plan of your own are more constructive paths, and one of them is almost certainly a better use of the same money.
The part that matters most: what this does to hiring and retention
Step back from the compliance mechanics for a moment, because the larger effect of this mandate is competitive, and it’s the part most worth your attention.
RetirePath requires your eligible employees to save for retirement, through automatic payroll deductions, at a point when some of them may not feel they can afford to. A lower-wage worker who sees 5% coming out of each paycheck, rising over time, has a few options. They can opt out, but the easier move for many will be to look for work elsewhere, specifically with employers who either fall outside the mandate or who offer a retirement plan that comes with something in return, like an employer match.
That dynamic puts pressure on you whether or not you intended to offer a benefit. To stay competitive for staff in a tight labor market, many employers in your position will conclude that they need to put some kind of retirement plan in place, not because the state requires that specific plan, but because their ability to attract and keep good people now depends on it.
Here’s the constructive part. If you’re going to be drawn into offering a plan anyway, a plan that includes an employer contribution can change the math in your favor. Plans where the employer contributes may qualify for tax credits that offset a meaningful share of the cost of starting and running the plan. In other words, the same decision that helps you compete for talent can also come with tax incentives that the state program, which prohibits employer contributions, cannot offer. That’s the question worth putting in front of your accountant.
Is RetirePath the right answer for you? Sometimes yes.
This is the part worth slowing down on, because the honest answer is “it depends,” and it depends on your business.
Let’s start with what RetirePath does well, because for some employers it’s genuinely the right choice. It’s simple to administer, with a straightforward registration and payroll-deduction process. It costs the employer nothing: no employer fees and no required contributions. It carries no fiduciary responsibility for you, since the Commonwealth administers the accounts and communicates with employees directly. And for your employees, the accounts are portable, theirs to keep even if they leave, and participation is entirely voluntary. If your priority is meeting the requirement with the least possible cost and effort, RetirePath was built for exactly that, and we’ll tell you plainly if it’s the right fit for your situation.
Now the trade-offs, because they’re real and they matter for many businesses. Because RetirePath is a single, standardized program serving every kind of employer in the state, it comes with limits a plan of your own wouldn’t:
- No employer match. You cannot contribute to or match your employees’ savings through RetirePath, even if you’d like to use a match to reward and retain people.
- Lower contribution limits. As a Roth IRA-based program, annual contribution limits are well below what a 401(k) allows, which particularly affects owners and higher earners trying to save meaningfully.
- A limited investment menu. Participants choose from a narrower set of options than a private plan can offer.
So the question isn’t “is RetirePath good or bad?” It’s “which option does more for my business and my people?” For many owners, especially those in the five-to-25 employee range now coming into scope for the first time, the mandate is less a compliance chore than a prompt to ask a better question: if I’m going to offer a retirement benefit anyway, what’s the version that actually does something for my business?
A qualified plan of your own, a SIMPLE IRA, a SEP IRA, or a 401(k), can let you:
- Match contributions and reward retention, turning a required benefit into a real recruiting and retention tool.
- Save far more, sooner, with higher contribution limits for you and your team.
- Capture available tax incentives, including credits that, for plans where you make an employer contribution, can offset much of the cost of starting and running the plan.
- Choose better investments, with a wider range of options than the state program provides.
In a tight labor market, the difference between “we’re enrolled in the state program because we had to be” and “we offer a real retirement plan with a match” is the difference between meeting a requirement and using it to your advantage.
What you should do now
If you already have a plan, you likely don’t need to do anything beyond confirming your exemption, but it’s worth a quick check that everything is in order.
If you don’t have a plan, the decision in front of you is really a choice between two paths. You can institute the mandated withholding through RetirePath, which means facilitating payroll deductions and adding the opt-out form to your onboarding and annual HR routine. Or you can adopt a retirement plan of your own, which can satisfy the mandate, help you compete for staff, and, if it includes an employer contribution, potentially earn you tax credits. The smart move is to make that choice deliberately rather than defaulting into the state program because a deadline is close, because the two paths differ meaningfully in cost, flexibility, tax treatment, and what they do for your ability to attract and keep good people.
That’s a conversation worth having before you act, not after.
If you have questions about how the RetirePath expansion affects your business, or you’d like to weigh the state program against a plan of your own, contact SpieglerBlevins. We’ll walk you through your options and help you choose the path that fits your business.
This article is provided for general informational purposes and reflects the RetirePath Virginia program as we understand it at the time of writing. Program details, deadlines, and penalties are set by the Commonwealth and may change; current information is available at RetirePathVA.com. This is not tax, legal, or investment advice. Please contact SpieglerBlevins to discuss your specific situation.