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A state-mandated retirement savings program is coming to Vermont. What you need to know!
By Dave Soulia on FYIVT.com
A state-mandated retirement savings program is coming to Vermont, and it’s not optional unless employees actively opt out. If you’re an employer or an employee, this will affect your paycheck and business operations starting in July 2025.
While the program aims to help workers save for retirement, forced participation, limited investment choices, and potential hidden costs have raised concerns about its fairness and effectiveness.
What is VT Saves?
VT Saves is a state-run retirement program requiring Vermont businesses with five or more employees—who do not offer a retirement plan—to automatically enroll workers in a payroll-deducted Roth IRA.
How It Works:
.Employees will have 5% of their paycheck deducted automatically unless they take action to opt out.
.Annual automatic increases (1% per year, up to 8%) unless the employee manually stops them.
.Employers do not contribute financially but must facilitate deductions and enroll employees.
When Does VT Saves Start?
The rollout happens in three phases based on employer size:
- July 1, 2025 → Employers with 25+ employees must enroll covered employees.
- January 1, 2026 → Employers with 15–24 employees must enroll covered employees.
- July 1, 2026 → Employers with 5–14 employees must enroll covered employees.
.Employees 18 and older are automatically enrolled unless they opt out.
.Employers must track opt-outs and handle payroll deductions.
.Penalties for non-compliance start at $10 per employee and rise to $75 per employee after 2026.
The Problem With Automatic Enrollment
While helping people save for retirement is a good idea, forced enrollment creates problems for both employees and businesses.
1. Employees May Not Realize They’re Losing Money
At Vermont’s 2025 minimum wage of $14.01/hour, a full-time worker will automatically lose at least $1,457 per year unless they actively opt out.
For many struggling to afford rent, food, and gas, this paycheck reduction may be an unwelcome surprise—especially for younger workers or those who are unaware of the deductions.
2. Can You Get Your Money Back? Maybe, But at a Cost.
If an employee realizes after a few weeks or months that they’ve been auto-enrolled and wants their money back, they can withdraw their contributions tax-free (since it’s a Roth IRA).
But any earnings on that money may be subject to a 10% early withdrawal penalty and taxes if they withdraw before age 59½.
Example:
A worker notices two months in and wants their money back. They get their contributions refunded, but if their account earned even $50 in interest, they’d owe a 10% penalty plus income tax on that $50.
Plus, if VT Saves charges the full $30 annual administrative fee before they withdraw, they might lose money even though they never intended to participate.
3. The State Picks Your Investments—And They Might Not Be the Best
VT Saves restricts investment choices, meaning workers cannot freely choose their IRA provider or pick higher-risk, higher-return options that younger investors may prefer.
What’s the difference? A low-risk investment at 3% over 50 years might grow to $223,000, while a higher-risk, higher-reward IRA (7% return) could reach over $776,000—more than three times as much.
Because the state selects the financial provider that manages investments, and while the law doesn’t explicitly state they will be low-yield, state-run retirement programs typically prioritize safer, lower-risk investments over aggressive growth strategies to minimize liability—meaning workers could miss out on greater long-term wealth potential.
Should VT Saves Be “Opt-In” Instead of “Opt-Out”?
Right now, workers are automatically enrolled unless they take action to opt out. A better solution? Make VT Saves opt-in instead!
.This would protect employee paychecks and ensure that only those who want to participate do so.
.Small businesses wouldn’t have to track opt-outs and deal with unnecessary administrative work.
.Workers would have time to consider private IRA options that might serve them better.
This isn’t about opposing retirement savings—it’s about financial freedom. Vermonters should have the right to choose where their money goes.
What Can You Do?
If you believe workers should have a choice in their retirement savings, contact your state legislators and demand an opt-in amendment.
Find your legislators here: https://legislature.vermont.gov/people
What do you think about VT Saves? Should the government be able to force workers into a state-managed retirement plan? Let us know in the comments!
Final Thoughts
VT Saves may have good intentions, but forced enrollment creates unnecessary complications for workers and businesses. Employees should not be forced to lose part of their paycheck unless they actively choose to save.
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Categories: News Analysis
Mandated Retirement??????? This must be another bright idea from the Vermont treasurers office. This is a forced theft of your wages from your labor. Got to wonder what pocket is getting greased with this savings account.
Lawfare warfare against the People. Mandated by force to take your wages and then placed into a State controlled ponzi-scheme with no say whatsoever where investments go? Wow…they really are a den of thieves and run like a criminal syndicate cartel.
Kinda sounds like Social Security doesn’t it
just plain dumb
Careful. Don’t throw the baby out with the bathwater.
If the so-called mandate directs deductions to a ROTH IRA, it may not be as off-putting as it at first seems to be.
First, it’s technically not ‘mandated’, if the employee must be informed and can choose to opt out.
Second, a ROTH IRA is, by design and construction, a self-managed retirement program, like a typical 401K. And, for another thing, not all employes will be allowed to participate in a ROTH IRA because they earn too much money.
A ROTH IRA, by the way, is a 401K-like savings account that is not only managed by the employee, … any and all investment gains, be they short term ordinary income or long-term capital gains, are tax-free… forever.
Nice to see a reasonable post based on some information. Knee jerk reactions from ill-informed commenters seems to be the norm here.
I agree a ROTH IRA can be a good thing, but the article says: “VT Saves restricts investment choices, meaning workers cannot freely choose their IRA provider or pick higher-risk, higher-return options that younger investors may prefer.” So it appears self management may not be an option in this case.
@H. Jay Eshelman, you are correct that it technically is not mandated that employees participate it IS mandated that employers enroll their employees unless specifically directed not (e.g opt out) to by said employee. If this plan is solely for the benefit of the employees, it begs the question; why not make an OPT IN benefit?
Secondly, do you honestly believe the State of Vermont is going to select ROTH IRAs for this venture? I don’t and I certainly would not trust the State of Vermont to manage the VT SAVES finances any better than they do with any of the State finances.
How they manage their money should send fear and loathing across the Green Mountain State……..
They should just come out and say it, give us all your money, we’ll take care of you. Not to worry, just send us all your money.
Here we go again! You’re not smart enough to manage your life, or your finances, so we’ll take over and show you how to do it by mandatory enrollment! God, it’s endless! Reminds me of the “Thought Police” beginning in Burlington in the ‘70’s! While the concept of saving for the future is a solid one, who’s benefiting by the cost of running this scheme? Sounds like G W Bush pushing to privatize Social Security!
My money, my choice.
“a state-run retirement program”
(coffee out nose)
Vermont’s teachers & state workers should have something to say about this ….
I believe this could be a good thing. Educating workers about their options is essential, as it is their hard worked for earnings. There is no better way to get workers to make a decision than the automatic opt-in, which is certain to grab their attention. My suggestion would be to allow the employee to select an opt-in at a rate of their choosing (1-5% deduction), as 5% might seem unreasonable for some, but a 2% might be reasonable for them.
As a young worker I was encouraged by my employer to put aside 3% of my wages in an employer managed 401 as they scaled back their retirement pension plan. I opted-in and have never regretted it. Comfortably retired now, and not trying to manage on social security. At the time I had two young children and yes those first few pay checks seemed short, but we adjusted. Over time I was able to increase the amount I saved for retirement, but the biggest hurdle was simply starting to save.