State Mandated Retirement Programs
Date: October 24, 2022
The State of Maryland now requires all private employers, with few exceptions, to provide a retirement savings vehicle for employees. The MarylandSaves program is now active and employers that have at least one W-2 employee can expect to receive notices alerting them to sign up or obtain an exemption.
Delaware is expected to roll out its mandated retirement program in 2025 and Virginia is expected to do so in 2023.
If your business or organization already provides a retirement program – pension, profit sharing, 401(k), 403(b), etc. – your business or organization cannot participate and does not need to enroll in the MarylandSaves program. However, you should apply for exemption on the MarylandSaves website to avoid further inquiries.
If your business or organization does not use an automated payroll service, you do not need to participate in MarylandSaves. The program is intended to coordinate with automated payroll systems for purposes of transmitting employees’ contributions.
The MarylandSaves program features an “auto-enrollment” requirement. This means that employees will be automatically enrolled in the savings program at a 5% contribution level, unless the employee opts out of participation. Contributions increase by 1% per year up to a maximum contribution of 10% of pay. Once enrolled, employees can opt out at any time and re-enroll at any time.
Employees are allowed to designate the investment of their accounts in a variety of mutual funds, including target date “Lifecycle” funds. The MarylandSaves program also includes an emergency savings fund option.
The investments in the program are on a “Roth” basis, that means contributions are deducted post-tax and, if Roth requirements are met, distributions are tax fee. However, employees who could not establish Roth IRAs individually because of income limits cannot contribute under the MarylandSaves program.
There are no fees to an employer participating in the program. Participating employees are assessed an asset fee of 18 basis points of their account value and a $30 annual account fee.
Note: as counselors to employers, we caution our clients against providing any assistance to employees with respect to the investment of their accounts. The program is designed to insulate employers from any claims of fiduciary liability from employees. Providing investment advice could jeopardize that immunity. Employees should be referred, instead, to the MarylandSaves website and outreach to the program administrator.
More information is available at Marylandsaves.com, but feel free to call us if you need to discuss further.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.