Auto-IRA (state-facilitated retirement program)

What an auto-IRA is

State law names which employers are covered, usually by employee count and by whether they already sponsor a plan. A covered employer registers, uploads its employee roster and sends payroll deductions to the program. Employees are enrolled at a default rate set by the state, in most programs into a Roth IRA, and can change the rate or opt out. CalSavers in California is one example.

Why it matters to employers

If your state has a mandate, you either register with the state program or offer your own plan and report an exemption. Missing the deadline can bring per-employee penalties in several states. An auto-IRA asks little of the employer, but employees are capped at the IRA limit, you cannot add a match, and high earners may be shut out of Roth IRA contributions.

Example with 2026 figures

A 12-person California company with no plan registers for CalSavers. An employee earning $50,000 who stays at the 5% default rate saves $2,500 in the first year, and the rate rises 1% a year to 8% unless she changes it. In a 401(k) she could defer up to $24,500 in 2026, and you could match part of it.

Common mistakes

• Ignoring state notices because you plan to start a 401(k) later. The registration or exemption deadline still applies.

• Starting a 401(k) but never reporting the exemption to the state program.

• Treating the state program as your plan. You cannot contribute to it or choose its investments.