Vermont’s state retirement mandate: Avoid penalties with a SIMPLE IRA alternative

Vermont has joined a growing number of states requiring employers to provide retirement savings access for their employees. Under the state retirement mandate, most private-sector employers with five or more employees are required to enroll in Vermont Saves (VT Saves) or a qualified retirement plan, such as a SIMPLE IRA. Vermont business owners have until March 1, 2025, to comply with the mandate or face ongoing penalties of up to $75 per employee.

While Vermont Saves is the state’s default program, many Vermont employers are choosing to meet the requirement through WealthRabbit, a qualified retirement platform that offers more flexibility, stronger tax advantages, and a simpler setup for both employers and employees.

What is Vermont Saves?

Vermont Saves (VT Saves) is Vermont's state-run Roth IRA program for businesses that don't offer a qualified retirement plan.

Who must participate

If your Vermont business has five or more employees and you do not already offer a qualified retirement plan, you are required to participate in VT Saves.

• Employers must have been in business in Vermont for at least two years (the current and preceding calendar year) to be covered.

• If you already offer a retirement plan that qualifies (such as a 401(k), 403(b), SIMPLE IRA, or SEP IRA), you can certify an exemption instead of enrolling in VT Saves.

How VT Saves works

• Employees contribute through payroll deductions (Roth, post-tax)
• No employer contributions (unlike SIMPLE IRA)

• The employer's role is limited to facilitating payroll deductions

• The default contribution rate is 5% contribution rate, with an automatic annual increase of 1% up to 8%

• $7,000 annual contribution limit (2025) - significantly lower than SIMPLE IRA's contribution limit

You’ll also want to review your payroll provider or integration to ensure your systems can handle automatic deductions if you choose VT Saves or manage contributions for a qualified plan. WealthRabbit simplifies this process with direct integrations to major payroll providers like QuickBooks, ADP, Gusto, and Paychex, making plan setup and administration effortless.

Understanding VT Saves deadlines

The registration or exemption certification deadline for all covered employers is March 1, 2025. This is when you must either register for the program or certify that your business is exempt.

Enrollment deadlines (employee onboarding to the program) are phased by employer size:

If you are a newly eligible employer (you just hit 5 employees or you’ve decided not to offer a plan), you should act within 12 months of becoming eligible to register or certify an exemption.

The real cost of non-compliance

Failure to comply with the state mandate may result in financial penalties per covered employee:

These penalties continue until your business becomes compliant by either setting up VT Saves or offering a qualified retirement plan.

Why Vermont employers should choose a SIMPLE IRA

VT Saves helps employees start saving, but it offers no employer match and limited contribution amounts. A SIMPLE IRA, on the other hand, allows employer contributions, provides higher contribution limits, and delivers valuable tax advantages for both employers and employees.

• A SIMPLE IRA (Savings Incentive Match Plan for Employees) is specifically designed for small businesses with 100 or fewer employees. Here's why Vermont businesses are choosing it over VT Saves:

Key features include:

• Meets state mandate requirements: A SIMPLE IRA is a qualified plan, allowing employers to certify exemption from VT Saves
• Employer contributions: Required employer match of 3% or non-elective contribution of 2%, both tax-deductible
• Higher contribution limits (2025):

- Standard: $16,500

- Small employers (≤25 employees): $17,600 under SECURE 2.0

- Catch-up (age 50–59 or 64+): +$3,500 (or $3,850 for small employers)

- Super catch-up (age 60–63): +$5,250

• Automated payroll integration: Works seamlessly with QuickBooks, ADP, Gusto, and Paychex
• No annual IRS filings or complex paperwork
• Compliance automation and expert support

The bottom line

With affordable solutions like SIMPLE IRAs through WealthRabbit, small businesses can meet the VT Saves exemption requirement, stop penalties immediately, and give their teams a benefit that’s easy to manage and more valuable than VT Saves.

Deadlines are approaching quickly. Get started today to protect your business from penalties and help your employees build long-term financial security.

Ready to explore your options? Learn how WealthRabbit's SIMPLE IRA can help your Vermont business stay compliant while offering a smarter, more flexible retirement solution.

*Disclaimer: This blog is for educational purposes only and is not intended as tax, legal, or financial advice. Please consult a qualified professional regarding your specific situation.