Vermont's Retirement Law Fine Jumps From $20 to $75 a Worker on October 1

Vermont small business owners who have been putting off Vermont Saves compliance have about eight weeks left before the cost of waiting nearly quadruples. Starting October 1, 2026, the maximum penalty for not facilitating the state's retirement savings program jumps from $20 per employee to $75 per employee — and the compliance deadline for the smallest covered employers already passed on July 1.

If you have five or more employees in Vermont and don't already offer a qualified retirement plan, here's exactly where you stand and what you need to do before the penalty escalates.

What Vermont Saves actually requires

Vermont Saves is a state-facilitated retirement program run through the Vermont State Treasurer's office. It automatically enrolls employees in a Roth IRA with a default 5% contribution rate that increases by 1% annually up to 8%, unless the employee opts out or chooses a different rate. Employers aren't required to contribute a dime — the law only requires you to facilitate payroll deductions and enroll eligible employees. The program is free to set up and is designed to integrate with existing payroll systems.

The mandate applies to any Vermont business with five or more employees that doesn't already offer its own qualified retirement plan, such as a 401(k), SIMPLE IRA, or SEP IRA. Independent contractors don't count toward the five-employee threshold — only W-2 workers do, which makes it worth double-checking how your business currently classifies its workforce. Our guide to independent contractor vs. employee status breaks down the factors that determine which category a worker actually falls into.

The deadlines, and where things stand right now

Vermont phased in the mandate by employer size:

• 25 or more employees: required to comply as of July 1, 2025
• 15 to 24 employees: required to comply as of January 1, 2026
• 5 to 14 employees: required to comply as of July 1, 2026

That means every business covered by the mandate should already be registered or have filed for an exemption. If you own a business with five or more employees and you haven't touched this yet, you're already out of compliance — but the financial consequences of that are about to get much steeper.

Why October 1 changes everything

Vermont built its penalty structure to escalate over time, specifically to give businesses a grace period before the fines get serious. From October 1, 2025 through September 30, 2026, the maximum penalty for a covered employee is capped at $20. Starting October 1, 2026, that maximum jumps to $75 per employee — a 275% increase.

For a business with 10 employees that has ignored the mandate entirely, that's the difference between a maximum exposure of $200 and $750. For a business with 50 employees, it's the difference between $1,000 and $3,750. And critically, the Vermont Treasurer's office has been explicit that paying the penalty doesn't get you off the hook: businesses are still legally required to register for the program or file for an exemption, penalty or no penalty.

Two ways to comply

You have two options, and neither one requires spending money on the retirement benefit itself.

1. Register and facilitate Vermont Saves

This is the default path for most eligible small businesses. You register through the state portal, provide basic payroll information, and the state handles enrollment, investment options, and account administration. Once you've connected your payroll system, ongoing administration is largely automatic — you're not managing individual employee accounts or making investment decisions.

2. Offer your own qualifying plan and file for an exemption

If your business already sponsors a 401(k), SIMPLE IRA, SEP IRA, or similar qualified plan, you're exempt from Vermont Saves — but exemption isn't automatic. You typically need to actively file for it through the state portal, often by uploading documentation like your plan's Form 5500 or plan document. States running these programs, Vermont included, generally treat silence as non-compliance, so simply having a private plan in place isn't enough on its own. If you're weighing whether to set up a private plan instead of using the state option, it's worth reviewing your overall benefits and compliance picture alongside other basics, like your business insurance coverage and your EIN registration, since a broker or plan administrator will typically ask for both when setting up a new retirement plan.

What to do this week

With roughly two months before the penalty ceiling nearly quadruples, the practical steps are straightforward:

• Confirm your current employee count under Vermont's counting rules — this determines which deadline already applied to you.
• Check whether your business already registered for Vermont Saves or filed an exemption. If you're not sure, don't assume someone else handled it — confirm directly.
• If you haven't registered and don't offer a private plan, start the Vermont Saves registration process now rather than waiting for the fine to jump.
• If you do offer a private plan, confirm you've actually filed the exemption paperwork, not just assumed you're covered.
• Loop in whoever handles payroll — enabling payroll deductions is usually the most time-consuming step, and payroll providers often have a straightforward integration process already built for state-mandated programs.

Vermont isn't unique here. A growing list of states — including Illinois, Oregon, Colorado, Maine, and Connecticut — now run similar mandatory retirement programs with their own escalating penalty structures. If you operate in more than one state, it's worth checking each state's rules separately rather than assuming compliance in one state covers you elsewhere. But for Vermont business owners specifically, the math is simple: the cost of staying out of compliance is about to go up sharply, and registering now costs nothing but a little bit of time.

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