If you own a small business in Virginia, RetirePath Virginia has an important compliance change taking effect on July 1, 2026, that may impact your company even if you have never offered retirement benefits before.
Virginia recently enacted legislation expanding the RetirePath Virginia retirement savings program. Under the new law, the participation threshold drops from employers with 25 employees to employers with five or more employees. This means thousands of additional Virginia businesses will now be required to either facilitate the state-sponsored retirement program or offer a qualified employer-sponsored retirement plan.
For many business owners, this requirement may come as a surprise. However, understanding the rules now can help you avoid last-minute compliance issues and evaluate whether a private retirement plan may be a better fit for your business.
What Is RetirePath Virginia?
RetirePath Virginia is a state-facilitated retirement savings program designed to help workers save for retirement through payroll deductions. The program is intended primarily for employees who do not have access to an employer-sponsored retirement plan such as a 401(k), SIMPLE IRA, or SEP IRA.
Unlike a traditional employer-sponsored plan, employers do not make contributions to employee accounts. Instead, employers facilitate payroll deductions and transmit contributions to the program. Employees are automatically enrolled but generally have the option to opt out if they choose not to participate.
Who Must Comply?
Beginning July 1, 2026, Virginia employers generally must participate if they:
- Have operated for at least two years;
- Employ five or more eligible employees;
- Do not currently offer a qualified retirement plan; and
- Meet the program’s eligibility requirements.
The expansion is significant because the previous threshold applied primarily to employers with 25 or more employees. By lowering the threshold to five employees, Virginia has substantially increased the number of businesses affected by the program. The law also broadens participation by including part-time employees when determining eligibility.
What Are Your Options?
If your business becomes subject to the new rules, you generally have two paths:
Option 1: Participate in RetirePath Virginia
The simplest option may be to register with the state program and facilitate payroll deductions for eligible employees.
This approach typically requires less administration than maintaining a traditional retirement plan. However, employers have limited flexibility regarding plan design, investment options, and employee benefits. For more information on the plans, pricing, and performance, click here.
Option 2: Establish Your Own Qualified Retirement Plan
Businesses can also satisfy the requirement by offering a qualified employer-sponsored retirement plan such as:
- 401(k) Plan
- SIMPLE IRA
- SEP IRA
- Other qualifying retirement arrangements
For some employers, this option may provide a competitive advantage when recruiting and retaining employees. A company-sponsored retirement plan may also create tax benefits for the business and allow greater control over plan features.
Penalty for Non-Compliance
The penalty for non-compliance is $200 per eligible employee assessed on an annual basis. For example, a non-compliant business with 15 eligible employees faces up to $3,000 in annual fines.
Why This Matters for Small Businesses
Many small business owners focus on payroll, taxes, insurance, and day-to-day operations. Retirement plan compliance often falls to the bottom of the priority list until a notice arrives.
The expansion of RetirePath means that businesses with as few as five employees should begin evaluating their retirement benefit strategy now rather than waiting for a registration deadline. If your business is approaching the five-employee threshold, now is the time to review your options. The right retirement plan can help you remain compliant, attract quality employees, and strengthen your business for the future.
If you’re unsure whether your business will be affected by the RetirePath expansion, take the eligibility quiz on the RetirePathVA website.
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