Retirement Plan Requirements for US Employers

No federal law generally requires a US employer to establish a retirement plan. What has changed is that fourteen states now require employers either to sponsor a qualifying plan or to enrol their staff in a state-run programme, and the thresholds are lower than most foreign employers expect. In California, Oregon and Maryland, a single employee is enough.

This is a payroll compliance obligation rather than a benefits decision, and in several states it carries per-employee penalties. It also reaches employers who already have a plan, because most programmes require an exemption to be certified rather than assumed.

Reviewed 25 August 2026. These programmes are expanding quickly and thresholds change mid-year. Check the programme’s own site before relying on any figure here for a filing decision.

What Federal Law Actually Requires

Federal law does not generally require an employer to establish a retirement plan or offer a match. If an employer adopts a SIMPLE IRA, safe-harbor 401(k), SIMPLE 401(k), or another design requiring employer contributions, it must follow that plan’s contribution rules. A match promised in the governing plan terms is equally binding.

What is mandatory is FICA, and it is worth being precise about what that is. FICA is a payroll-tax system, not a retirement contribution: Social Security funds retirement, survivor and disability benefits, while Medicare funds health insurance. The employer pays 6.2% for Social Security and 1.45% for Medicare, each matched by the employee.

The combined employer rate of 7.65% applies while wages remain below the Social Security wage base, which is $184,500 for 2026. Above that, the employer continues paying 1.45% Medicare with no ceiling, but no further Social Security tax.

So the accurate position is that the mandatory federal layer is a payroll tax, and everything above it was historically discretionary. The state programmes below are the first significant change to that.

The States That Require a Plan

These states operate an automatic-enrolment programme, usually a Roth IRA, and require employers without a qualifying plan of their own to facilitate it. The obligation sits with the employer. Thresholds and business-duration tests vary considerably, so read the row rather than assuming a national rule.

Two more are coming. Hawaii is developing a one-employee mandate with a projected mid-to-late 2026 launch, though no firm compliance date has been announced. Washington Saves is scheduled for July 2027. If you employ in either, the position will change before it settles.

California: The Widest Exposure

California matters more than the others because the threshold is one employee and the penalties are calculated per employee rather than per company.

From 1 January 2026, every California employer with at least one employee must either provide access to a qualifying retirement plan or certify an exemption with CalSavers. Employers with one to four employees had a registration deadline of 31 December 2025.

Missing a deadline does not itself trigger a penalty. The published schedule runs through notice and cure periods first. An employer that fails to comply within 90 days of a notice of non-compliance faces $250 per eligible employee. If the failure continues to 180 days after that notice, a further $500 per eligible employee applies, and $500 per eligible employee is permitted for each subsequent non-compliant calendar year.

What Counts as Complying

There are three routes, and only one involves running a retirement plan.

Sponsor a qualifying plan of your own. A 401(k), SEP-IRA, SIMPLE IRA or similar exempts you from the state programme. In several states, including California, Oregon and Colorado, that exemption still has to be certified online rather than assumed.

Facilitate the state programme. Register, upload your employee roster and run the payroll deductions. The state administers the accounts, handles the investments and deals with employees directly. Your role is registration and deduction.

Certify an exemption where the programme requires it. Requirements vary by state and sometimes depend on whether the programme has contacted you, so check the specific rule rather than applying one approach everywhere. The point to take is that having a good plan does not always mean having nothing to file.

What It Actually Costs the Employer

Less than most people assume, and the misunderstanding is what stops companies acting.

Under the state auto-enrolment programmes the employer does not contribute. These are employee-funded Roth IRAs, and the employer’s obligation is to register, enrol staff and run a payroll deduction. There is generally no match, no employer contribution and no programme fee charged to the employer.

So the real cost is administrative: adding a deduction code, maintaining the roster as people join and leave, and handling opt-outs. That is a payroll process question rather than a compensation budget question, and treating it as the latter is why employers delay something that was never going to cost much.

A sponsored plan is a different calculation. Plan administration carries fees, and some designs oblige the employer to contribute once adopted. Choosing to sponsor a plan rather than facilitate the state programme is usually about recruitment competitiveness rather than compliance.

Where Foreign Employers Get Caught

Assuming a small team is out of scope. Thresholds count employees, not revenue, and California, Oregon and Maryland all start at one. A single remote hire creates the obligation.

Having a plan and doing nothing. Sponsoring a qualifying plan exempts you from the programme but not always from the filing. Where certification is required, an uncertified exemption looks the same as non-compliance from the state’s side.

Forgetting that remote hiring multiplies states. Obligations follow where the employee works, not where the company sits, and the thresholds are not aligned with each other.

Treating it as an HR project. The work is payroll: a deduction code, a roster feed and reconciliation as people join and leave. Routing it to whoever owns benefits rather than whoever runs payroll is how deadlines get missed.

A worked example makes the multi-state problem concrete. Take a six-person US team with no company retirement plan: two employees in California, one in Oregon, two in Texas and one in Illinois.

So a team of six generates two live obligations, in two different programmes, with two different registration processes, while three of the six (the two Texas employees and the Illinois employee) sit outside any mandate. There is no single national filing that covers it. Illinois would come into scope only once the business had at least five Illinois employees in every quarter of a calendar year and had been in business for at least two years, so new Illinois hires change the following year’s position, not the current one.

How NNRoad Supports This

Worth being precise about the boundary, because it decides whether NNRoad is relevant to you at all.

NNRoad is not a retirement plan provider and does not sponsor or administer 401(k) plans. If you have your own US entity and want a plan, you need a plan provider, or you facilitate your state’s programme directly.

Where NNRoad does handle this is Employer of Record employment. When NNRoad is the legal employer, NNRoad manages the employer-side process within the agreed service scope, as part of running payroll. For companies with a US entity, payroll support can run the deduction and reporting side against a plan or programme you have chosen.

Frequently Asked Questions

Are US employers required to offer a 401(k)?

Federal law does not generally require an employer to establish a retirement plan or offer a match. However, fourteen states require employers without a qualifying plan to enrol staff in a state-run programme, so the answer depends on where your employees work.

Which states require employers to offer a retirement plan?

California, Oregon, Maryland, Vermont, Illinois, Colorado, Connecticut, Maine, Delaware, Virginia, Minnesota, Nevada, New York and New Jersey all operate mandatory programmes. Hawaii and Washington have programmes in development. Thresholds range from one employee in California, Oregon and Maryland to twenty-five in New Jersey.

What happens if an employer does not comply with CalSavers?

After a notice of non-compliance, California applies $250 per eligible employee if the failure continues 90 days, and a further $500 per eligible employee at 180 days, with $500 per employee permitted for each subsequent non-compliant calendar year. Missing a registration deadline does not itself trigger a penalty; the notice and cure periods apply first.

Does the employer have to contribute to a state retirement programme?

No. The state auto-enrolment programmes are employee-funded Roth IRAs. The employer registers, enrols employees and runs the payroll deduction, but generally makes no contribution and pays no programme fee.

We already offer a 401(k). Do we still have to do anything?

Often yes. Sponsoring a qualifying plan exempts you from the state programme, but several states including California, Oregon and Colorado require the exemption to be certified online. Requirements vary by programme, so check the specific state rather than assuming.