Written by Anca Stradley, CPA, Dembo Jones
According to the 2018 Retirement Confidence Survey, a sizable percentage of employees reported that they or their spouses have not saved money for retirement – and about 45% reported that the total value of their household’s savings and investments, excluding the value of their primary home, was less than $25,000. Workers who have a retirement plan in place have significantly more in savings and investments than do those without a plan. To help solve this growing retirement crises, some states enacted laws in recent years to support saving for retirement and Maryland is one of these states.
In May 2016, Maryland passed into law the Maryland Small Business Retirement Savings Program (MarylandSaves). This program was created to address the large portion of Maryland’s workforce that does not have a retirement plan in place. Under the Maryland law, most Maryland employers will be required to offer their employees some sort of retirement savings plan option. This can be a traditional pension, a 401(k) plan, a 403(b) plan, a SEP Plan, a SIMPLE IRA plan, a governmental deferred compensation plan — or a WorkLife account from MarylandSaves.
The pilot launch of the program happened on June 6, 2022, while September 6, 2022, will mark the full launch of MarylandSaves.
Which employers are required to establish a retirement savings plan under the MarylandSaves program?
An employer will be required to be compliant under the MarylandSaves program if all of the following apply:
- The employer is registered to conduct business in the State of Maryland;
- The employer has at least one W-2 employee;
- The employer uses an automatic payroll service system;
- The employer has been in operation for at least two years; and
- The employer does not currently offer an employer-sponsored retirement savings plan to their employees.
According to the MarylandSaves website, the program is offered at no cost for employers; employers are not required nor permitted to contribute to the program; there are no federal reporting requirements; and employers will also receive a waiver for the $300 annual report filing fee for every year they facilitate participation in MarylandSaves. If the employer already has a retirement savings program in place for their employees, they will also qualify for the $300 fee waiver.
MarylandSaves will be fully available across the state in September 2022. Employers should expect to receive an invite and reminder from MarylandSaves via email or mail. Employers will also receive an Access Code that will be used to create an account on MarylandSaves.
Can employees opt-out of this program?
- Yes, employees can opt-out of participating in the program at any time online, by calling 1-833-811-7438 or by mailing in the MarylandSaves Employee Opt-Out Form.
- Employees will be added to the program automatically by their employer, they will receive information directly from the MarylandSaves program and they will have a 30-days opt out period.
- If the employee opts out before the end of the 30-day notification period, no payroll deductions will be made on their behalf and their account will not be activated. If they opt out after 30 days, their employer will be notified to stop any payroll deductions, and any deductions that may have been made can be withdrawn.
- If the employees chose not to make changes to their account after the 30-day opt out period, they will be enrolled automatically with default savings of 5% of their gross income contributed to their account. Employees will have the ability to opt-out at any time or to change the amount they want to defer through payroll.
Can employers opt out of the program?
- No, an eligible employer cannot opt-out of the program and they will have to go through the registration process and create an account on MarylandSaves by providing their EIN and access code received.
- However, if the employer already offers a qualified retirement plan, they will not be eligible to participate in the program and during the registration process, in the space provided, they will certify that they already offer a retirement plan.
Additional information can be found on marylandsaves.com or contact Dembo Jones today to speak with one of our experts.