Beginning in 2026, most Vermont employers will be required to provide their employees with access to a retirement savings plan through the new Vermont Saves program. This initiative automatically enrolls eligible workers into a state-facilitated Roth IRA, funded through payroll deductions.
While Vermont Saves is designed to expand access to retirement savings, it’s not always the best fit for business owners. Many employers will find that setting up a private 401(k) or other qualified retirement plan offers far more flexibility, better benefits for employees, and complete exemption from the state program.
What Vermont Saves Means for Your Business
The goal of Vermont Saves is to make it easier for employees without workplace plans to start saving for retirement. Here’s what employers should know:
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Who’s impacted: Vermont businesses with five or more employees that don’t currently offer a qualified retirement plan.
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How it works: Employees are automatically enrolled in a Roth IRA, with contributions deducted directly from payroll.
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Employer responsibilities: You’ll be responsible for managing employee data, processing payroll deductions, and sending contributions to the state program.
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Opt-out option: Businesses that establish their own qualified retirement plan—such as a 401(k), SIMPLE IRA, or SEP IRA—are exempt from Vermont Saves.
Where Vermont Saves Falls Short
Although the state program is well-intentioned, it has several limitations that make a private plan the stronger option:
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No employer match: Vermont Saves does not allow matching or profit-sharing, reducing its value as a recruitment or retention tool.
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Restricted investment options: Employees can only invest in a limited selection of funds chosen by the state.
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Ongoing administrative tasks: Employers must still process deductions and maintain records without the full service or flexibility of a private plan.
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Lower contribution limits: A Roth IRA under Vermont Saves caps annual contributions at $7,000–$8,000, whereas 401(k) plans allow up to $23,000 (or $30,500 with catch-up contributions).
Why a Private 401(k) or Retirement Plan Is a Better Fit
A private retirement plan offers benefits that Vermont Saves simply can’t match:
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Higher contribution limits for both business owners and employees.
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Employer matching or profit-sharing to strengthen employee loyalty and attract top talent.
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Broader investment flexibility and plan customization.
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Tax advantages from deductible employer contributions.
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Full exemption from Vermont Saves compliance.
By choosing a private plan, you gain greater control over your retirement program design and can turn your benefits package into a real competitive advantage.
Action Steps for Vermont Employers
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Review your benefits: Determine if you already have a qualified plan in place.
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Consider your options: If not, explore setting up a 401(k), SIMPLE IRA, or SEP IRA before Vermont Saves deadlines take effect.
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Opt out officially: Once you establish a private plan, register it with the state to confirm your exemption.
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Communicate proactively: Educate your employees about your private plan, contribution options, and any employer match.
The Bottom Line
Vermont Saves ensures all workers have access to a retirement savings vehicle—but it’s not a substitute for a robust, well-structured 401(k) or retirement plan. Employers who value flexibility, higher contribution limits, and employee engagement should consider implementing their own private plan.
Taking action now allows you to opt out of Vermont Saves, design a plan that truly fits your business, and help your employees build stronger financial futures.
