401(k) plans aren’t just about checking a compliance box—they’re a game-changer for businesses looking to attract top talent, build long-term wealth strategies, and stay ahead of state mandates. More states are rolling out requirements, and employers who don’t get ahead of these 401(k) compliance changes could face steep penalties. Let’s break it down so you know exactly what’s at stake and how to turn a 401(k) into a strategic asset rather than just another obligation.
Why 401(k) Mandates Are Here to Stay
It’s not a question of if—every state is moving toward some form of mandatory retirement savings plan. The reality is that Social Security alone won’t sustain future retirees, and lawmakers are shifting the burden onto businesses to help close the savings gap. If you’re an employer, your choice is clear:
- Enroll in a state-sponsored retirement plan—which may come with administrative headaches and liability.
- Work with a trusted payroll or financial provider who specializes in 401(k) plans, ensuring you’re not just compliant but also maximizing benefits for your business and employees.
Who’s Responsible for What?
Managing a 401(k) involves multiple key players, and understanding their roles is crucial for avoiding compliance missteps:
- Plan Sponsor (Employer) – You own the plan, meaning compliance, setup, and maintenance fall on your plate. But with the right partners, this doesn’t have to be a burden.
- Plan Administrator – Typically the employer, unless you outsource to a 3(16) Fiduciary, which offloads liability and administrative tasks to experts. Example: Principal Financial Group, Fidelity, or Empower Retirement.
- Third-Party Administrator (TPA) – Ensures IRS and Department of Labor (DOL) compliance, recordkeeping, and reporting. Example: Ascensus, July Business Services, or Northwest Plan Services.
- Fiduciaries – Anyone making investment decisions or overseeing the plan. If you don’t want that responsibility, consider hiring a 3(38) investment manager.
- Financial Advisors & Investment Managers – Not all advisors are the same—some can help structure plans to maximize tax benefits and long-term wealth. Example: Edward Jones, BlackRock, or Raymond James.
- Payroll Providers – Crucial for integrating contributions and avoiding compliance issues. Payroll bureaus like Rabco Payroll are a great resource, as they handle every aspect of retirement plan administration, either internally or through trusted partners.
Upcoming Deadlines: Is Your State on the List?
State-mandated retirement plans are rolling out fast, and penalties for non-compliance are no joke. Here’s a look at upcoming deadlines for 401(k) Compliance:
- California (CalSavers): Employers with 1-4 employees must enroll by December 31, 2025, or face fines up to $750 per employee.
- Delaware (Delaware EARNS): Employers with more than five employees must comply by January 1, 2025.
- Hawaii: Launching July 2024 (specific rules pending).
- Nevada: Phased rollout starting July 1, 2025, for larger employers, with full compliance required by 2027.
- Vermont: Employers with 25+ employees must comply by July 1, 2025; smaller employers have until 2026.
States with Mandatory Retirement Plan Requirements
Here’s where mandates are already in place or coming soon:
- California (CA)
- Colorado (CO)
- Connecticut (CT)
- Delaware (DE)
- Hawaii (HI)
- Illinois (IL)
- Maine (ME)
- Maryland (MD)
- Massachusetts (MA)
- Nevada (NV)
- New Jersey (NJ)
- New York (NY)
- Oregon (OR)
- Vermont (VT)
- Virginia (VA)
- Washington (WA)
The Biggest Risks (And How to Avoid Them)
Many employers think setting up a 401(k) is simple—but here are the major risks you need to watch out for:
- Missed Contribution Deadlines – The IRS and DOL don’t take late deposits lightly. Penalties can include a 15% excise tax and loss of tax advantages.
- Fiduciary Liability – If you don’t have a 3(16) plan administrator or a trusted financial advisor, you could be personally liable for mistakes.
- Administrative Overload – If payroll and 401(k) contributions aren’t synced properly, you’re looking at compliance nightmares.
How to Stay Ahead of the Curve
- Know Your State’s Rules – The deadlines are real, and penalties are steep.
- Automate Contributions – Working with a payroll provider like Rabco ensures seamless deposits and compliance.
- Reduce Your Fiduciary Risk – Consider outsourcing to a 3(16) administrator and working with an experienced financial advisor.
- Educate Your Employees – A well-structured 401(k) isn’t just about compliance—it’s a recruiting tool and a wealth-building opportunity.
Final Thoughts
401(k) compliance isn’t something you want to ignore. State mandates are spreading, penalties are growing, and employees are expecting better retirement benefits. The good news? With the right strategy and partners, your 401(k) plan can be a powerful asset rather than just another regulatory burden.
If you need help navigating state mandates, integrating 401(k) with payroll, or finding the right financial advisor, Rabco has the expertise to make the process seamless. Let’s turn compliance into opportunity—contact us today to get started! Schedule a consultation with our experts today to see how Rabco can support your business in creating a thriving work environment.
