Virginia's Expanded RetirePath Mandate: What CPAs Need to Know

By Sean Danowski, CFP

This year, approximately 34,000 Virginia businesses will need to meet Virginia’s new retirement solution mandate for their employees. Here’s what CPAs need to know to guide and advise their clients.

There have been significant changes to the retirement plan landscape in Virginia these past several years — beginning in part with the SECURE Act and SECURE Act 2.0, passed at the federal level in 2019 and 2022, respectively, followed by Virginia's own retirement-plan mandate that went into effect in 2023. What changed this year?

The original legislation, signed into law in 2022, had two intentions: first, it set the requirement that any employer that had been in business for at least two years and employed 25 or more full-time workers had to provide a retirement solution for employees. Second, it tasked Virginia with creating a state-run retirement solution (RetirePath) in which employers could enroll if they did not want to initiate their own solution.

Legislation signed into law this May 2026 substantially expanded the program's reach. Effective July 1, 2026, the employee threshold was reduced from 25 to just five employees. In addition, part-time employees are now counted when determining whether a business meets the employee threshold, although seasonal employees may still be excluded under program rules. As a result, an estimated 34,000 additional Virginia businesses will now be required to either sponsor a qualified retirement plan or participate in RetirePath Virginia.

What is the deadline for a business to comply, and what are the consequences of non-compliance?

Virginia has established a phased implementation timeline:

• Employers with 10–24 employees must comply by Sept. 30, 2026.
• Employers with 5–9 employees must comply by Oct. 30, 2026.

Employers that do not already have a qualified plan in place (those that do can certify that they are exempt from the new mandate) must either implement a qualified retirement plan or register their business with RetirePath. Failure to do so could result in a $200 fine per employee.

What are some of the pros and cons of RetirePath, Virginia's state-run retirement solution?

RetirePath was designed to provide a simple, low-cost retirement savings option for employees whose employers do not sponsor a retirement plan. Advantages include:

• No employer fees.
• Minimal administrative responsibilities.
• No employer fiduciary responsibility.
• Automatic payroll deduction for employees.
• A straightforward way to satisfy the state mandate.

Some of the potential drawbacks are:

• Contributions are limited to IRA contribution limits.
• Contributions count toward the individual's annual IRA limit.
• Employers cannot provide matching or profit-sharing contributions.
• Investment options are generally more limited than those available through many private retirement plans.
• Participants do not receive the same level of personalized retirement guidance often available through financial professionals.

How do contribution limits compare across different types of retirement plans?

One of the most significant differences between RetirePath and employer-sponsored retirement plans is the amount participants can contribute to their accounts, potentially affecting the long-term likelihood of success for employees and employers as they plan for retirement.

For instance, the RetirePath solution has the same contribution limits as an individual retirement account (IRA) — for 2026, this means each enrollee can contribute up to $7,500, with catch-up contributions of $1,100 for those employees who are 50 years or older.

SIMPLE IRA plans allow for contributions up to $17,000, with a $4,000 catch-up contribution, though it does require either a 2% non-elective contribution for all employees or 3% match for any participating employee paid for by the employer.

There is further variability in a 401(k), but generally, it allows for employee contributions up to $24,500, with additional catch-up contributions of $8,000. The employer has the option to provide matching contributions, but doing so can ensure their contribution is allowed up to the maximum levels. Additionally, 401(k)s can include a profit-sharing component, allowing for even higher optional deferrals for business owners (up to $72,000 a year in tax-deferred accounts).

For business owners and higher-income employees, these higher contribution limits can represent a meaningful opportunity to accelerate retirement savings and reduce current year tax burden.

When does a private retirement plan make more sense than RetirePath?

It depends on what the business owner is trying to accomplish. If the main goal is to comply with regulations and they are not already employing their own retirement strategy (through a traditional or Roth IRA), then RetirePath will be the simplest way to meet those goals.

If the business owner is looking for any of the following, however, reviewing their own retirement plan may make more sense:

• Higher tax deferrals.
• Additional contributions in addition to their current IRA contributions.
• Employee attraction and retention.
• Assistance with retirement planning and education for them and their employees.

For many growing businesses, a retirement plan can become a valuable strategic tool rather than simply a compliance obligation.

Some employers may be concerned that the cost of their own plan is significantly more than the RetirePath option. What tax credits or tax deductions are available to make retirement plans more cost-efficient for these businesses?

Many business owners may be surprised to learn how generous current retirement plan tax incentives can be.

Under federal law passed as part of the SECURE Act 2.0, eligible small businesses that have not opened a retirement plan previously may qualify for:

• Tax credits that can cover up to 100% of eligible startup costs, subject to applicable limits.
• Additional tax credits tied to employer contributions made on behalf of employees during the early years of a new plan — up to $1,000 per employee for the first two years, with reduced credits in years 3–5.
• Ordinary business tax deductions for employer contributions made to retirement plans.

As a result, the net cost of establishing a retirement plan may be significantly lower than many employers expect.

What might CPAs who work with business owners consider discussing with their clients now?

CPAs are often the first trusted advisors clients turn to when new legislation impacts their business.

This presents an excellent opportunity to discuss:

• Whether the client is subject to the expanded RetirePath requirements.
• Upcoming compliance deadlines.
• The differences between RetirePath and private retirement plan options.
• Available tax credits and deductions.
• Whether retirement plan design could help achieve broader business, tax and succession-planning goals.

These conversations can help clients avoid rushed decisions while positioning them for long-term success.

Why would a CPA want to include a financial advisor in the conversation around RetirePath and retirement plans when discussing them with their clients?

Much like a business-owner's CPA is the quarterback of their client's financial projections and taxes, a financial advisor serves as a quarterback of their long-term planning goals.

An advisor serves as just one part of the team that can build and deliver a retirement plan that will satisfy the business owner's objectives. By coordinating with a third-party administrator to design and administer the plan, a recordkeeper to serve as custodian of employees' investments, and an investment manager (either 3(21) or 3(38)) to review the available plan investments, the financial advisor helps to keep the plan in compliance with regulations and reviews the plan regularly with the owner to ensure it keeps up with the needs of the business, employer and employees.

Additionally, the advisor can serve as a source of financial education for employees and employers, which can drive employee participation in the plan and retention for the business.

What are the next steps for business owners?

Business owners have a very short window to evaluate their options now rather than waiting until their compliance deadline approaches. As a result, it's likely that many will opt for RetirePath initially — but that may not be the optimal choice in the long term.

The first step is determining whether the business falls under the expanded RetirePath mandate. From there, owners should compare RetirePath with alternative retirement plan options, taking into account contribution limits, employee benefits, administrative requirements and available tax incentives.

CPAs can play a critical role in initiating these discussions with clients. And when clients need assistance evaluating specific retirement plan solutions, partnering with a knowledgeable financial advisor can help them make informed decisions that support both compliance and long-term business objectives.

If you have business-owner clients who may be affected by Virginia's expanded RetirePath requirements, now is the time to start the conversation.

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.