State mandates are reshaping the U.S. retirement landscape

States are playing a larger role in shaping workplace retirement plans. Twenty-two states have moved to close the private sector coverage gap on their own, and the programs they have built are already reshaping the way employers design their plans, consider lifetime income solutions, and manage requirements compliance across state lines. For plan committees, the question is no longer whether this state-level activity matters, but how quickly to respond to it.

Key takeaways

1. The states are setting the pace. Twenty-two states now require employers to offer a qualifying plan (an employer retirement plan that satisfies the state’s exemption requirements) or enroll workers in a state-facilitated individual retirement account (IRA). Rather than crowding out private plans, the mandates are prompting employers to start their own.
2. Colorado is the template to watch. In three years the state has stacked auto-enrollment, a best-interest annuity standard, back-to-back tax-incentive proposals and a legislative push for in-plan lifetime income.
3. Lifetime income is becoming a plan-design question. With the DOL clearing guaranteed-withdrawal solutions as qualified default investment alternatives (QDIAs), and public-sector research showing the 4 percent rule cannot reach 80% replacement on its own, sponsors need to consider how their participants will turn their savings into reliable lifetime income.

Twenty-two states have now enacted retirement savings programs requiring private-sector employers to either offer a qualifying plan or enroll their workers in a state-facilitated IRA, and more are weighing similar legislation.¹

These programs exist because of a documented, persistent gap: roughly 59 million private-sector workers, nearly half the workforce, have no employer-sponsored retirement plan.² The states stepped in because Washington, D.C., has not closed that gap. The landscape they are building, state by state and mandate by mandate, is rapidly rewriting plan-design best practices for sponsors.

What the numbers say

When Oregon launched the country’s first state auto-IRA in 2017, the fear was that a mandatory state program would crowd out private employer plans. Recent research suggests these programs may encourage some employers to create their own retirement plans. Georgetown University’s Center for Retirement Initiatives estimates that state auto-IRA policies have directly induced at least 30,000 new employer-sponsored plans. Employers compelled to look closely at the cost of sponsoring a plan found it lower or simpler than they had assumed, whether through tax credits or the growth of multiple employer plans (MEPs) and pooled employer plans (PEPs), which allow employers to participate in a shared plan.

These programs took nearly five years to reach $500 million in assets, but momentum has accelerated, with total assets across all state programs crossing $3 billion in April 2026.³ More than 1.2 million workers now hold funded accounts. Participation rates among enrolled workers are robust as well, a reflection of auto-enrollment and auto-escalation, which have increasingly become the plan-design default. Participants retain flexibility, but the automation gets them started.

The coverage gap is still widest at small employers: 63% of workers at firms with fewer than 50 employees have no access to a plan.⁴ Part-time, seasonal, gig, and variable-hour workers at large companies also face the same gap. State mandates were designed for those workers first.

What Colorado built, and why it matters

No state illustrates the speed and ambition of this shift more clearly than Colorado. In roughly three years it has assembled what may be the most complete state-level retirement policy environment in the country. Colorado’s actions raise practical questions about plan coverage, annuity options and compliance requirements.

Colorado SecureSavings launched in March 2023. By early 2026 it had enrolled more than 100,000 workers, with assets approaching $200 million.⁵ More telling for sponsors: Colorado now leads all auto-IRA states in new private-employer plan formation. In 2023, new plans made up 18.4% of all private plans in the state, double the 9.1% national average, and up 5.9% year over year.⁶ Colorado employers without a qualifying plan are not routing workers into the state program and moving on; they are building plans of their own.

In August 2022, Colorado adopted the National Association of Insurance Commissioners’ best-interest standard for annuity recommendations, becoming the 28th state to require that agents act in a consumer’s best interest rather than merely recommend a suitable product.⁷ The standard aligns with the SEC’s Regulation Best Interest. If a plan offers annuity options, or if advisors to plan participants recommend annuities in Colorado, that standard now governs those interactions. It is both a compliance checkpoint and a fiduciary-care matter.

The annuity incentive push. Colorado legislators have introduced bills in back-to-back sessions to remove the caps on pension and annuity income deductions for state taxpayers. SB25-136, in 2025, proposed removing all caps starting in tax year 2026; HB26-1062, in 2026, tried again for taxpayers 55 and older starting in tax year 2027. Both were voted down in committee. Under current law, Colorado’s pension and annuity deduction remains capped at $20,000 for workers aged 55 to 64 and $24,000 for those 65 and older.⁸

The math is worth understanding even so, because it may resurface in Colorado or elsewhere. Consider a participant receiving $40,000 a year from an inplan annuity. Under current law, they can deduct $20,000 to $24,000 from Colorado taxable income, depending on age; had either bill passed, they could have deducted the full $40,000. At Colorado’s flat 4.4% income tax rate, that is roughly $700 to $880 in additional annual state tax savings — meaningful across a 20- year retirement, and a clear signal that Colorado sees the tax code as a lever for annuity adoption.

The legislative signal. In April 2026, the Colorado General Assembly passed Senate Joint Resolution 26-016, urging the legislature to consider adding lifetime income options to the PERA DC plan and the voluntary PERAPlus 401(k) and 457 plans, so public employees can access guaranteed income comparable to the PERA DB plan. The resolution carries no binding force, but an overwhelming, bipartisan vote signals the priorities of Colorado’s retirement policy. For employers with PERA-covered workers, and for any sponsor tracking the direction of state policy, the push to put lifetime income inside defined contribution structures is now a matter of formal legislative record.

The lifetime income question every sponsor needs to answer

Colorado’s efforts also expose the design difficulty of building annuities into a plan. The TIAA Institute’s 2025 analysis of 85 public-sector retirement systems found that defined contribution plans need combined employer-employee contribution rates of 12%–15%, plus access to in-plan lifetime income, to approach an 80% incomereplacement rate for a full-career worker.⁹ The standard 4% withdrawal rule — still the default benchmark in most retirement projections — cannot get there on its own.

In September 2025, the Department of Labor issued Advisory Opinion 2025- 04A, concluding that a lifetime income solution incorporating a Guaranteed Lifetime Withdrawal Benefit can qualify as a Qualified Default Investment Alternative under ERISA.¹⁰ Sponsors can now default participants into options that generate income rather than simply accumulate assets, with documented fiduciary protection.

Adoption keeps climbing, but work remains. While 77% of recordkeepers now offer an annuity option, those that do not most often cite the cost-benefit analysis as their biggest hurdle.¹¹

Three actions to take

1. Audit coverage posture
   Confirm that the plan qualifies under the exemption rules in every state where there are employees. Mapping the thresholds and registration deadlines across active-mandate states often surfaces inconsistencies the plan committee can move to unify. Where part-time, seasonal or variable-hour workers fall outside current eligibility, weigh whether expanding eligibility is now simpler than complying with a state program.
2. Run an income-adequacy analysis
   Contribution-rate and utilization data show what participants are doing; a projected income-replacement analysis shows whether it is enough. If the median participant is not on track for 80% replacement, reenrollment or auto-escalation may be the lever to raise savings rates. Emergency-withdrawal patterns and other planning behaviors can also flag education gaps worth closing. The plan’s recordkeeper and advisors can help source these numbers and set the remediation steps.
3. Map the state legislative pipeline before it reaches you
   Colorado has now twice tried to use the tax code to spur annuity adoption, and more legislators may well take up the same themes, including deduction expansions, lifetime income mandates in state-run programs, and consumer-protection standards for annuity recommendations. Identify the states where the plan has a material employee population, check whether relevant retirement income legislation is active in the current session, and set a monitoring alert so the plan is not reacting after a bill passes. Sponsors already thinking about lifetime income design will find the transition far easier than those who are not.

The states that moved on retirement savings did not wait for a federal framework, and the results are running well ahead of expectations. Colorado compressed a decade of gradual policy work into three years, and its combination of auto-enrollment, consumer protection and potential tax incentives for lifetime income could meaningfully change outcomes for participants there, and in the states that follow. It is, fundamentally, a design argument — and one worth having at the plan-committee level, wherever a sponsor’s employees happen to live.