If you run a small business with five to thirty employees and you do not offer a retirement plan, you may have gained a new compliance obligation this year without realizing it. Utah, Mississippi, and Philadelphia all advanced automatic IRA mandates in 2026 — Philadelphia becoming the first U.S. city to run its own program, PhillySaves — joining a wave that now covers most states and has pushed total state auto-IRA assets past $2.5 billion.
The rule is simple and easy to miss: if you have been in business for a period, have a threshold number of employees, and do not sponsor a qualified retirement plan, you must either sponsor a plan or automatically enroll your employees in the state's (or city's) auto-IRA, or face penalties. Here is the 2026 landscape and how to stay on the right side of it.
The Auto-IRA Model — What It Is and What It Is Not
State auto-IRAs are not employer-sponsored retirement plans. The employer does not contribute, does not match, and does not act as a fiduciary. The employer's role is to facilitate: register with the program, provide a payroll file, and remit employee contributions via payroll deduction to the employee-owned Roth IRA.
Key mechanics:
- Auto-enrollment with opt-out. Eligible employees are enrolled at a default rate of 3–6% (varies by state; many use 5% with auto-escalation of 1% per year up to 8–10%). Employees may change the rate or opt out entirely at any time.
- Roth IRA by default. Contributions are after-tax; earnings grow tax-free if qualified. Employees above Roth income limits may be diverted or may need to opt out.
- No employer match. The employer facilitates deduction and remittance only. You cannot contribute to an employee's auto-IRA.
- Portability. The IRA belongs to the employee and moves with them if they change jobs.
The employer's alternative is to sponsor a qualified plan — a 401(k), 403(b), or SIMPLE IRA — which exempts you from the mandate entirely. Many small employers find that sponsoring a low-cost 401(k) or a pooled employer plan (PEP) is competitively better than facilitating the state program, because a 401(k) allows employer contributions, higher limits, and a recruitment benefit the auto-IRA does not.
Utah, Mississippi, and Philadelphia — What's New in 2026
Most early auto-IRA states — California (CalSavers), Oregon (OregonSaves), Illinois (Illinois Secure Choice) — have been live for years. The 2026 expansion adds both state and municipal layers:
Utah MyIRA. Utah's program, long in discussion, is now awaiting implementation following 2026 legislation. Details on employer thresholds and deadlines are pending final rulemaking, but the Morgan Stanley at Work tracker lists Utah among the "simply awaiting implementation" cohort, with applicability expected to reach employers with as few as five employees — consistent with the trend toward covering the smallest employers.
Mississippi. Similarly newly authorized, Mississippi's program is in the same awaiting-implementation stage. Both Utah and Mississippi follow the standard template: employers above the threshold without a qualified plan must register and enroll, with penalties for non-participation.
Philadelphia PhillySaves — the first municipal auto-IRA. Voters approved PhillySaves in 2026, tasking a new board with implementation for an estimated 200,000 Philadelphians lacking employer coverage. PhillySaves is slated to begin operating by mid-2026–2027 once vendors and systems are in place. Covered Philadelphia businesses that have operated for at least two years and do not offer a pension or 401(k) will be required to either offer a qualified plan or enroll employees into PhillySaves. The city mandate layers on top of Pennsylvania's state-level discussions, so Philadelphia employers should track both.
For small employers operating in multiple jurisdictions — say, a business with locations in Utah and Philadelphia — each mandate applies separately to the employees working in that jurisdiction.
The Staggered 2026 Deadlines You Must Track
Where programs are already live, 2026 deadlines are falling now:
- New York Secure Choice: 30+ employees March 18, 2026; 15–29 employees May 15, 2026; 10–14 employees July 15, 2026. Employers below the threshold or who already sponsor a plan must certify their exemption using their Access Code and EIN — exemption is not automatic; you must file it.
- Other live states (California, Oregon, Illinois, Colorado, Virginia, Maryland, etc.) have their own rolling deadlines, many of which already applied to employers with 5+ employees.
If you are near a threshold — for example, 10 employees in New York — headcount on the measurement date determines whether you are covered this year. Hiring one more employee can pull you into the mandate, while sponsoring a 401(k) removes you entirely.
How to Stay Compliant — or Exempt Yourself
Two paths keep you compliant:
Path A: Facilitate the auto-IRA. Register on the program's employer portal (CalSavers, OregonSaves, PhillySaves once live, etc.), provide the payroll file, and begin remitting deductions on the next payroll after enrollment. Provide the required employee notices, which the programs supply, and process opt-outs promptly. There is no employer fee to participate, but you must maintain payroll integration and remit on time — late remittances are treated similarly to late payroll tax deposits.
Path B: Sponsor a qualified plan and certify exemption. A 401(k) — including a pooled employer plan (PEP) or a Starter 401(k) designed for small businesses under SECURE 2.0 — exempts you. The exemption is not self-executing; you must log in and certify that you sponsor a qualified plan, using the Access Code mailed to the business. Small employers who adopt a new plan may be eligible for SECURE 2.0 start-up tax credits — up to $500 per year for three years for auto-enrollment, plus credits for employer contributions — which often offset the first years' plan costs.
Many small employers choose Path B for a simple reason: a 401(k) allows you to contribute for yourself and to help employees save substantially more than the IRA limits, and it doubles as a hiring tool in a tight labor market. The auto-IRA is a compliance floor, not a benefits strategy.
The Cost of Ignoring It
Penalties vary by state but share a structure: a warning period, then per-employee per-year fines, and in some states, daily penalties until registration. California's CalSavers penalties, for example, reach $250 per eligible employee after 90 days of noncompliance and $500 after 180 days. New York and others follow a similar escalation. Beyond fines, facilitating an auto-IRA late still requires you to remit back contributions for employees who should have been enrolled — catch-up deductions that compress into fewer paychecks and create employee relations issues.
The cheapest compliance is timely: register, certify exemption, or enroll before the deadline that applies to your size.
Keep Your Payroll Records Program-Ready
Auto-IRA compliance lives where payroll lives. Your payroll system should flag whether you have a qualified plan on file, track the mandate status by work state and city, and automate the deduction and remittance file. A quarterly check — qualified plan still active? headcount still below threshold? exemption certification still current? — prevents the late notice that turns a free facilitation into a penalty.
Simplify Your Financial Management
Auto-IRA mandates add one more state-by-state payroll obligation, alongside withholding, unemployment, and local taxes. Beancount.io keeps payroll, deductions, and filings in plain-text, version-controlled accounting — so your retirement-plan status by jurisdiction is traceable, not just remembered. Get started for free and keep your small-business retirement compliance as organized as your payroll.