A state prison inmate mows grass on Capitol Square. (Ned Oliver/Virginia Mercury)

Part-time employees won’t be included in Virginia’s new auto-IRA program after a contingent of Senate Democrats rejected Gov. Ralph Northam’s proposal to broaden an initiative meant to encourage more lower-income workers to save for retirement.

The program, set to take effect no sooner than 2023, will require businesses that don’t offer retirement benefits to give full-time workers the option of enrolling in a state-run plan allowing them to put some of their paycheck toward retirement.

Several Senate Democrats said they didn’t want to burden small businesses with administering the enrollment of employees working fewer than 30 hours a week or people hired for seasonal positions.

“Sometimes I wonder if anyone up on the third floor ever actually managed a business or owned a business,” said Sen. Chap Petersen, D-Fairfax, referring to the floor in the Capitol building where the governor’s offices are.

Advocacy groups who supported a broader program said the decision will exclude more than 150,000 Virginia who would have otherwise been automatically enrolled in the savings program, offered to workers who don’t have access to employer-sponsored retirement benefits.

Ten Senate Democrats joined with the chamber’s 19 Republicans to defeat Northam’s amendments on an 11-29 vote. The House of Delegates, where the bill had originated from Appropriations Chairman Luke Torian, D-Prince William, had voted 55-45 to approve the governor’s proposal, which needed passage in both chambers.

Senate Democrats who supported Northam’s change argued the burden on businesses would be minimal, pointing out business owners would have no obligation to contribute to workers’ retirements and would mostly just have to make sure their payroll systems were deducting money and directing it to the state-run plan. Excluding part-time workers, they said, leaves out the people with the very sort of job instability the proposal is meant to help, particularly gig workers and young people who may have multiple part-time jobs.

“The days of going with a company where you’re going to be a 40-year employee and that company is going to provide you with retirement and benefits and the safety net you will need, are gone. They’re just gone,” said Sen. Barbara Favola, D-Arlington. “So now we have a generation of folks who really don’t have an opportunity to invest in their future.”

Sen. John Bell, D-Loudoun, who opposed including part-time workers, disputed the notion that some workers are being denied opportunities to save for retirement without state intervention, saying several financial institutions advertise customers can “open an IRA in 10 minutes or less.”

“In the time of this debate they could’ve already opened an IRA if they wanted one,” Bell said. 

The program, still projected to cover about 800,000 Virginia workers, would be run by the Virginia College Savings Plan’s governing board, a group of finance and investment professionals that already administers plans meant to help families build savings for higher education expenses. Workers at businesses with 25 or more full-time employees would be enrolled by default, but they’d have the opportunity to opt out.

Similar programs are in the process of being enacted in several other states. They’re being pitched as forward-looking efforts to save taxpayer money in the future by nudging more workers toward stable retirement instead of having them rely on government programs like Medicaid because they lack resources as they age.

Northam has until May 7 to act on the bill, but he’s expected to sign it even without his provision for part-time workers.

Natalie Snider of AARP Virginia, which has advocated for the program for years, said the group will continue pushing to make it as strong and accessible as possible.

“We’re excited that it’s finally real,” she said.