The Mandate Question Every Employer Is Asking, and How One Network Partner Answers It

When California expanded its retirement savings mandate, small businesses didn’t just have compliance questions. Many had no idea where to start. CalSavers automatically enrolls eligible employees through payroll deductions into a Roth individual retirement account (IRA), and a lot of Coastal Payroll clients weren't sure what that meant for their business or whether they needed to facilitate the program.

For Coastal Payroll, an isolved Network Partner, those questions quickly became part of broader client conversations. With roughly 90% of its client base in California, the end-to-end human capital management (HCM) provider saw how the mandate affected small employers in real time and where they needed more guidance.

State-Mandated Retirement Plans Are Spreading

California isn't alone. A growing number of states now require employers to offer a retirement savings option or enroll workers in a state-sponsored program. CalSavers, OregonSaves, Illinois Secure Choice, Colorado SecureSavings, MyCTSavings and New York Secure Choice are a few of the established programs, and more states are rolling out their own versions each year. These programs are often called auto-IRAs because they automatically enroll eligible workers.

The details vary by state law, but the pattern is similar. Most mandated plans use automatic enrollment, fund contributions through payroll deductions and default employees into a Roth IRA. Employers generally don't contribute or manage investments, but they are responsible for facilitating the program, keeping enrollment current and meeting deadlines. Penalties for non-compliance can apply where employers miss those requirements.

For businesses that operate in more than one state, keeping track of which rules apply where can get complicated quickly.

Helping Employers Understand Their Retirement Options

CalSavers, California’s retirement savings program, is free for employers to use, but free doesn’t always mean simple. For small employers already balancing payroll, compliance and daily operations, managing the state-run option can quickly become another responsibility for someone who is already stretched thin.

Enrollment, deduction updates, ongoing monitoring and termination tracking all require attention. If the process isn’t managed properly or kept current, employers may face administrative gaps and potential penalties.

"Free sounds great, but there is a significant amount of work and monitoring by someone in the organization to manage this," said Chris Coleman, director of retirement services at Coastal Payroll. "Failure to manage it properly and keep things current can result in penalties."

Many employers were also unsure how the mandate worked and what options were available. CalSavers is one way to meet the requirements, but it’s not the only path. Coleman helps clients compare payroll-deducted IRAs, 401(k) plans and other retirement solutions, weighing factors like cost, employer contribution limits and investment options so they can choose an option that fits their business.

“Having a subject matter expert to provide information on a specific topic instills confidence in clients and prospects,” Coleman said. “They know there is a resource available, and we feel it helps us win not only retirement, but payroll deals in general.”

Using Icon to Support Retirement Requirements

For employers exploring alternative retirement plans, Coastal Payroll offers Icon's Portable Retirement Plan (PRP) through the isolved Marketplace.

Icon, a retirement solutions provider, gives employers a payroll-connected retirement option that can help satisfy state mandate requirements without the same level of manual work often required by state-run programs. It’s especially helpful for employers with hourly, part-time, seasonal or mobile workforces, where participation may be low but compliance requirements still apply.

“Employers were seeking automated solutions to manage retirement enrollment, deduction tracking, remittance of funds and terminations,” Coleman said. “This solved all of that.”

Icon can also support employers operating across state lines. Coleman shared the example of one Coastal Payroll client with multiple employer identification numbers (EINs) under common ownership across three states. Some states had retirement mandates, while others did not, making a state-sponsored retirement plan harder to manage across the entire workforce.

"Having this solution that's fully baked into isolved is great," Coleman said. "We don’t have to worry about API issues, and it's easy to turn on. There would be no reason to go and solicit something outside of that ecosystem."

Offering Retirement Options That Fit the Business

Whether clients choose Icon or another qualified retirement plan, Coastal Payroll sees payroll connectivity as a key part of making retirement plan administration easier. Once a client signs up for Icon, Coastal Payroll’s integrations team can activate the connection in about 15 minutes.

“When someone signs up, turning the API on with isolved is super simple,” said Coleman. “As long as the client completes the necessary steps in Icon, it literally takes about 15 minutes to turn it on and get it connected. It’s not a long, drawn-out process where you’re going back and forth for a month.”

Icon also provides employees access to a portable retirement savings option they can keep even if they change jobs, with no rollover required.

Expanding Client Support Through the Marketplace

Today, Coastal Payroll supports more than 2,500 clients with retirement solutions. As state-mandated retirement programs expand, more employers are trying to understand what applies to them and which options make sense for their business.

For service providers and other Network Partners, those questions can open the door to more meaningful client support, a deeper relationship and a more trusted advisory role. With access to Icon and other 401(k) partners through the Marketplace, Coastal Payroll can help clients find retirement solutions that fit their business and reduce administrative work.

"Even if you're just implementing it for compliance, you're indirectly giving employees access to a savings and investing vehicle that they otherwise would need to research and set up on their own,” Coleman said.