Many Washington state employers are already familiar with the administrative burdens and employee frustration following implementation of the Washington Cares Act, i.e., the state-run long-term care program from 2023. Concerns over limited benefits, lack of portability, and overall value left many questioning its effectiveness.

As a reminder, this program requires employers to withhold 0.58% of employees’ wages and periodically remit these amounts to the state. The benefit provided is a state-run insurance program to help workers pay for long-term care services — up to $36,500 a year. Some workers who failed to opt out in time are objecting to the program in light of the low ceiling on the cost of care provided and other limiting factors, such as the loss of portability if a worker leaves the state.

Despite this response, the state is moving forward with the Washington Saves automatic individual retirement account program under RCW 19.05.030, modeled after California’s CalSavers system, with penalties for noncompliance beginning in 2030.

Under the law, all Washington state employers in existence since 2025 — with five or more full-time, age 18 or older employees — must adopt the Washington Saves program by July 1, 2027, with one major escape hatch: A Washington company can avoid the mandate by opting to maintain a 401(k) program for its employees.

Employers can also escape the pending requirements by implementing a Savings Incentive Match Plan for Employees IRA; however, there are some drawbacks to SIMPLE IRAs. Those who take this approach, face materially lower yearly dollar contribution limits for employees, as well as virtually no flexibility in setting annual employer contribution amounts. To encourage employers to take the 401(k) — versus SIMPLE IRA — approach, the IRS provides generous “Start-Up Plan Tax Credits,” reducing or eliminating 401(k) implementation and administration costs.

Those Washington employers who will be subject to the new rules should not ignore the real ongoing burdens triggered by the approaching Washington Saves Auto-IRA mandates. Companies without a 401(k) or SIMPLE IRA in place in 2027 must prepare to add the following administrative responsibilities to their in-house duties under RCW 19.05.030(3)(a): 

• Register the new Auto-IRA with the Department of Labor and Industries;
• Notify all eligible employees of their initial contribution from wages, and their opportunity to opt out. The employer must act to cease contributions for employees who choose not to defer;
• Provide timely investment material to all employees, notifying them of their investment options and applicable fees, including a default option;
• The employer’s payroll department must timely remit participant contributions to the investment custodial platform selected by the state;
• Distribute Auto-IRA information, including eight written disclosures provided by the state governing board to employees as required; and
• Annually provide participant reports regarding employees’ Auto-IRA accounts.

The program’s limited benefit structure is another concern. IRA contribution limits are projected at $8,000 to $9,000 annually by 2027, compared to an estimated $25,500 to $34,000 under 401(k) plans. 

Additionally, if structured similarly to California’s model, certain higher-compensated employees may be excluded from participation. If the California model is adopted, including the provision that tax-deductible employee contributions are not allowed, some employees, including business owners, would not be allowed to participate at all, since highly compensated employees are restricted from making Roth-IRA deferrals due to income limits.

Washington state employers should act now to evaluate their options. Implementing a 401(k) ahead of the 2027 deadline not only avoids default enrollment into the state program, but also provides a more meaningful and flexible benefit to support employee recruitment and retention. 

Washington state employers are advised to take steps now to evaluate their options if they're interested in avoidind having to conform to another state-mandated benefits program. Alternatively, implementing a 401(k) program in 2026 is an easy and potentially inexpensive way to generate employee attraction and retention, with the added benefit of avoiding a default into Washington Saves.

Clay Randall is the co-founder of Liberty Lake-based third-party administrative company Randall & Hurley Inc. He can be reached at 509-954-7719 and [email protected].