Treasurer’s Rule Change Set to Bring Thousands of Vermont Micro-Businesses Under Mandatory Retirement Program

Employers must register through the Vermont Saves portal, provide employee census information, and facilitate payroll deductions at their own cost.

Vermont’s mandatory retirement savings program is preparing to expand its reach to the state’s smallest businesses through an administrative rule change that will lower the employer threshold from five employees to two, according to a press release from State Treasurer Mike Pieciak’s office announcing the program’s first-year results.

The expansion, being pursued through rulemaking process 25-P039, represents a significant broadening of the Vermont Saves mandate that will bring thousands of additional micro-businesses under the program’s requirements. Unlike the program’s original employee threshold, which was established by Act 43 of 2023, this expansion is being implemented through administrative authority rather than new legislation.

Understanding Vermont Saves

Vermont Saves is a state-facilitated retirement savings program that requires employers who don’t offer their own retirement plans to automatically enroll their workers in individual Roth IRA accounts. The program was signed into law by Governor Phil Scott on June 1, 2023, and is designed to address what state officials call a “coverage gap”—the estimated 45% of Vermont’s private-sector workforce, roughly 104,000 individuals, who lack access to an employer-sponsored retirement plan.

Workers are automatically enrolled at a 5% contribution rate unless they opt out or adjust their contribution level. The program operates as an “Auto-IRA,” meaning employers simply facilitate payroll deductions without managing funds or providing matching contributions. Because employers have no discretionary control over the funds, the program avoids federal ERISA regulations that govern traditional employer-sponsored retirement plans.

Current Program Status

As of January 2026, Vermont Saves reports 5,200 funded accounts with $4.5 million in total savings and 1,283 participating employers. The average account balance is approximately $865, reflecting the program’s recent launch and phased rollout schedule.

The Phased Rollout Schedule

Understanding the current results requires recognizing that Vermont Saves is rolling out in phases based on employer size. According to Act 43, the original mandate deadlines are:

July 1, 2025: Employers with 25 or more employees

January 1, 2026: Employers with 15 to 24 employees

July 1, 2026: Employers with 5 to 14 employees

This means the vast majority of Vermont’s small businesses—particularly the 75% with nine or fewer employees—have not yet reached their compliance deadline. The 1,283 employers currently enrolled primarily represent the state’s larger small businesses that faced the July 2025 deadline.

The Significance of the Rulemaking Expansion

The move to lower the threshold to two employees represents a strategic regulatory shift. While Act 43 originally set the baseline at five employees, it granted the Treasurer broad administrative authority to adopt rules necessary for program implementation.

By utilizing the administrative rulemaking process to expand the definition of “Covered Employer” to businesses with as few as two employees, the Treasurer’s office is effectively extending the mandate without returning to the legislature for a statute change. This approach aligns Vermont with states like Oregon and California, which eventually lowered their thresholds to capture more of the workforce.

What This Means for Different Business Sizes

Businesses with 25+ employees: Already subject to the mandate since July 2025. If you offer a qualified retirement plan like a 401(k), you must certify your exemption in the program portal to avoid compliance notices.

Businesses with 15-24 employees: Your compliance deadline was January 1, 2026. If you don’t offer a retirement plan, you should be enrolled in Vermont Saves now.

Businesses with 5-14 employees: Your compliance deadline is July 1, 2026. You are currently in a voluntary enrollment period and can register early through the Vermont Saves portal.

Businesses with 2-4 employees: Currently exempt under the original statute, but the proposed rule change will likely bring you under the mandate within the next 12-18 months once the rulemaking process concludes. No specific deadline has been announced yet.

How the Program Works for Employees

Workers enrolled in Vermont Saves have contributions automatically deducted from their paychecks into individual Roth IRA accounts. The default contribution rate is 5% of gross pay, with automatic annual increases of 1% per year until reaching 8% (unless the employee opts out of escalation).

Contributions are made with after-tax dollars, meaning no immediate tax deduction, but earnings grow tax-free and qualified withdrawals in retirement are tax-free. Because contributions are post-tax, workers can withdraw their principal contributions at any time without taxes or penalties, though this would defeat the retirement savings purpose.

Workers can opt out of the program entirely, reduce their contribution rate to as low as 1%, or pause contributions at any time through their online account.

Investment Strategy and Recent Performance

For the first 30 days after enrollment, contributions are held in a money market fund to protect principal during the opt-out window. After that, funds are automatically invested in State Street Target Retirement Date Funds based on the worker’s age.

The program’s first-year performance benefited from favorable market conditions in 2025, with some target date funds showing returns above 20% for the year. However, workers should understand that investment returns fluctuate and account balances may decrease in down markets.

Program Costs

While employers face no direct fees from Vermont Saves, workers enrolled in the program pay a flat annual administrative fee of approximately $26 (charged as $6.50 per quarter), plus underlying investment fund expense ratios typically ranging from 0.05% to 0.15%.

For accounts with small balances, this flat fee represents a higher percentage cost than traditional investment accounts that charge only percentage-based fees. For example, the $26 annual fee on an $865 account represents about 3% of the balance, though this percentage decreases significantly as balances grow. A $10,000 account would see the flat fee represent only 0.26% of the balance.

Employer Compliance Requirements

Covered employers must register through the Vermont Saves portal, provide employee census information, and facilitate payroll deductions. Employers are not responsible for managing investments, providing matching contributions, or filing additional federal forms.

Employers who already offer qualified retirement plans like 401(k)s, 403(b)s, or SIMPLE IRAs must certify their exemption in the system but are not required to participate.

Non-compliant employers face escalating penalties starting at $10 per uncovered employee and increasing to $75 per employee over time.

Comparison to Vermont’s Earlier Attempt

Vermont Saves replaces an earlier, unsuccessful initiative called the Green Mountain Secure Retirement Plan, which was authorized in 2017 but never launched. That program was structured as a voluntary Multiple Employer Plan that would have required employers to take on significant fiduciary responsibilities under federal ERISA law. The legal complexity and voluntary nature meant few businesses participated.

The current Auto-IRA model sidesteps ERISA by making the employer’s role purely administrative, which both reduces legal liability for businesses and makes participation mandatory rather than optional.

How Vermont Compares to Other States

Vermont is one of more than a dozen states that have implemented or are developing state-facilitated retirement programs. Oregon’s program, OregonSaves, has been operating since 2017 and now covers employers with one or more employees. California’s CalSavers and Illinois Secure Choice follow similar models.

Vermont’s 5% default contribution rate matches the industry standard, and its penalty structure—capping at $75 per employee—is more lenient than California’s $750 per employee maximum but similar to Oregon’s $100 cap.

What Happens Next

The most immediate deadline is July 1, 2026, when employers with 5 to 14 employees must be in compliance. This represents the largest segment of Vermont’s business community and will test the program’s administrative capacity to onboard thousands of small businesses simultaneously.

The rulemaking process to lower the threshold to two employees is ongoing through Rule 25-P039. Once finalized, businesses with 2-4 employees will receive notice of their compliance deadline, likely in late 2026 or 2027.

The Treasurer’s office continues to conduct outreach to employers about registration requirements and exemption certification. Businesses can find more information and register at vtsaves.vermont.gov.

The expansion to micro-businesses represents the final phase of Vermont’s strategy to close the retirement coverage gap for workers at the state’s smallest employers—family-run businesses, independent contractors with a few employees, and sole proprietors with limited staff. Whether this administrative expansion proceeds smoothly or generates pushback from the micro-business community will likely shape the program’s long-term trajectory and determine how close Vermont comes to universal retirement coverage.