What Happens If You Ignore the Rule, Miss the Deadline, or Choose the Wrong Provider
Retirement Plans? We’re Still Trying to Make Payroll.
If you're running a cannabis business, you're already navigating enough chaos: staying compliant with 280E, finding a bank that won’t ghost you, managing high turnover, and trying to keep operations afloat in an industry that changes every month.
So when your state sends you a letter about something called a “mandatory retirement plan,” it’s fair to feel a little confused—or even annoyed.
But here’s the truth: this isn’t just busywork. It’s a real legal requirement, and if you ignore it, your business could face significant financial penalties.
This guide will show you why cannabis businesses are affected, what the risks look like, and what options you have to protect your license, your money, and your people.
What Is a State-Mandated Retirement Plan?
Many states across the U.S. are now requiring employers to either offer a qualified retirement plan (like a 401(k)) or register with a state-run retirement savings program. These are often Roth IRAs facilitated through state portals, with automatic payroll deductions taken from employees unless they opt out.
The idea is to help workers save for retirement—especially in industries where employer-sponsored retirement plans have been lacking. And cannabis is one of those industries.
The rules are straightforward: if you don’t offer your own plan, and you meet the employee threshold, you have to register. You also have to process deductions and track opt-outs.
Sounds simple, right? Not when you’re in cannabis.
Cannabis Businesses Are Not Exempt
This is where things get sticky. You might assume that your business is flying under the radar because you’re working in cannabis and everything already feels “off the grid.”
But state retirement mandates apply to all eligible employers, regardless of industry.
If you’re running a dispensary with 5+ employees, operating a grow site with trimmers, managing a manufacturing site, or offering ancillary cannabis services—you are still legally required to comply.
There are no cannabis carve-outs. No grace periods. No “we’ll get to it later.” And regulators are already sending notices to cannabis businesses in California, Illinois, and Oregon. Colorado is next.
The Penalties Are Real—and They Stack
Many operators think the worst that can happen is a slap on the wrist or a delayed deadline. But the truth is far more expensive.
Let’s take California’s CalSavers program as an example. If you're noncompliant for 90 days after the registration deadline, you’re fined $250 per eligible employee. If you’re still not compliant after 180 days, that fine increases by another $500 per employee. That’s $750 total per worker.
Ten employees? That’s $7,500.
And California is just one state. Here’s how other states stack up:
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Illinois charges $250–$500 per employee per year.
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Oregon fines $100 annually per worker, capped at $5,000.
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Colorado, New Jersey, Virginia, and Maine are already launching or expanding their enforcement.
These are not theoretical penalties. We’ve seen cannabis operators hit with real fines—some totaling over $20,000 simply because they ignored the notices or assumed they were exempt.
Why This Hits Harder in Cannabis
Let’s be honest—if you’re operating in this space, you’re already under more scrutiny than the average business.
You’re being watched by state regulators, financial institutions, and tax agencies. Missing a mandated retirement plan isn’t just a mistake—it could look like negligence to a bank or a licensing board.
Worse, it could impact your ability to renew your cannabis license, especially in states that cross-reference your labor compliance during audits.
And let’s not forget about your employees. Not offering any form of retirement benefit sends a loud message: there’s no long-term future here. That may not be your intention, but that’s how it lands.
Your Two Main Options
Option 1: Register for Your State’s Retirement Program
This is the quickest and easiest path to compliance. Most state programs are built for small businesses that don’t have an HR department or payroll specialists.
You register your business, auto-enroll your employees, and deduct a small portion of their wages for contribution—unless they opt out. The state manages the investment side. You just process deductions.
Pros:
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Low cost or no cost to you
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Simple registration
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No employer match required
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Compliance is fast
Cons:
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Roth IRA contribution limits are lower than 401(k) limits
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No ability to offer an employer match
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Not all state programs are cannabis-friendly—some providers still reject cannabis money
Option 2: Offer a Private, Cannabis-Compliant 401(k)
This option gives you more control—and more value. You can choose to offer matching contributions, build a competitive benefits package, and create a stronger workplace culture. Plus, it shows regulators and banks that you’re running a serious operation.
Pros:
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Employer matching allowed
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Higher contribution ceilings
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Custom plan designs
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Often improves retention and recruiting
Cons:
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Costs more up front (avg. $1,200–$3,500/yr)
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Requires a provider who accepts cannabis-related payroll funds
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Takes longer to set up
If you’re not sure which option is best, don’t guess. Let us walk you through the numbers and compliance risks.
What About 280E?
This is where a lot of cannabis operators get tripped up.
If your business is plant-touching, you can’t deduct employer contributions to retirement plans at the federal level due to IRS 280E. That means offering a 401(k) match won’t be tax-deductible.
But that doesn’t mean you shouldn’t offer it.
The retention value alone can make it worthwhile. Many of our clients have found that offering a 2% match saved them tens of thousands of dollars in rehiring and retraining costs—more than offsetting the lack of a deduction.
If you’re ancillary (not directly touching the plant), you can still deduct retirement contributions.
Cannabis Retirement Compliance FAQs
Q: Can my state’s plan block me for being in cannabis?
A: Some can—or they delay processing. That’s why you must choose a cannabis-compliant provider or confirm that your state’s system will accept your payroll funds.
Q: Are contributions mandatory for employers?
A: No. Most state plans don’t require employer contributions—just payroll facilitation and registration.
Q: What if we pay in cash?
A: You still must calculate and remit contributions electronically. A cannabis-native payroll provider can help you stay compliant.
Q: What if employees don’t want to participate?
A: They must opt out after enrollment. You’re still responsible for tracking that and keeping documentation.
Q: Does this impact license renewals?
A: It could. Several states are now reviewing HR and payroll compliance during license renewals.
Q: Can we get a grace period?
A: Not usually. Once your deadline hits, the clock starts ticking—and penalties stack fast.
Cannabis Retirement Compliance Checklist: 9 Questions to Ask Yourself Right Now
Here’s your quick audit to avoid fines:
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Do we have five or more W-2 employees—seasonal or full-time?
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Have we received any notices from our state about mandatory retirement compliance?
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Do we currently offer a qualified retirement plan (like a 401(k))?
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Is our plan provider verified cannabis-compliant and able to accept our payroll funds?
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Have we compared the cost of noncompliance with the cost of a basic plan?
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Do we know our exact registration or compliance deadline?
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Can our payroll system automate deductions—even in cash-heavy environments?
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Have we prepared clear internal communication for employees, including opt-out steps?
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Are we tracking and saving opt-out documentation in case of a future audit?
If you answered “no” or “I’m not sure” to even one of these, it’s time to act—fast.
You didn’t get into cannabis to become an expert in retirement policy. But this is part of running a compliant, sustainable business—especially if you want to grow.
And when regulators come knocking, you don’t want this to be the thing that takes you down. Not when it’s fixable in 20 minutes with the right plan.
So whether you choose to enroll in your state’s program or set up your own 401(k), don’t wait. Compliance is no longer optional. And the longer you delay, the more expensive it becomes.
Ready to Cross This Off Your Risk List?
Book a 20-minute call and we’ll walk you through your state’s deadline, options, and setup—no jargon, no pressure.
📩 Or email us your state + employee count, and we’ll send you a mapped-out action plan tailored to your cannabis operation.
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