MarylandSaves Workplace Retirement Program Implemented, Sets Annual Compliance Certification Deadline of Dec. 1

The Maryland Small Business Retirement Savings Program (MarylandSaves) will create benefits for employers and employees. Originally set to start in mid-2020, the program was delayed by the COVID-19 pandemic. After a pilot launched in June 2022, the program was implemented  Sept. 15, 2022.

Similar to nearly a dozen other states that enacted state-sponsored programs, the Maryland legislature adopted the MarylandSaves program – signed into law by the governor in 2016 – to address the growing retirement crisis in the United States.

Why does Maryland need a state-sponsored retirement program?

Nationally, near-retirement households have a median retirement account balance of $14,500, while 62 percent of households with working individuals between the ages of 55-64 have less than one times their annual income saved for retirement¹. Also, less than 25 percent of those working for a company that employs less than 10 people have access to a payroll-based retirement plan, whether that is due to limited resources or lack of time to administer by the employer. These statistics, from a National Institute of Retirement Savings report, are particularly relevant to Maryland, where small businesses make up nearly 70% of employers and employ 17 percent of the state’s non-governmental workers².

The MarylandSaves program can help start to reverse the trend for employees, while offering employers a recruiting and retention tool.

What employers should know about the MarylandSaves program

Maryland requires all employers with automatic payroll processing to participate in the MarylandSaves plan that enables employees to contribute through payroll deferral. There are exemptions for several businesses:

• Startups that have operated for fewer than two years
• Businesses that offer or have offered within the past two years a voluntary payroll-based retirement savings plan such as a 401(k)
• All government entities (federal, state, and local)

Employers who offer the IRA-based retirement savings plan or another qualified plan will have the $300 annual report filing fee waived if they enroll by Dec. 1. Employers can opt out of offering MarylandSaves if they offer their own employer-sponsored retirement plan that satisfies the mandate. They can also have the $300 annual filing fee waived if they certify exemption. Non-participating employers may need to prove exemption each year to avoid the penalty.

Employers are not required to make contributions toward the plan – for matching or administration. MarylandSaves is intended to be self-financing from fees collected on funds invested in the IRAs.

What employees should know about the MarylandSaves program

The MarylandSaves program does stipulate requirements for employees, as well, including:

• Participants must be 18 years old
• Employees don’t have access to an employer-sponsored retirement savings plan

Employees will be enrolled automatically but can opt out of participating in the program at any time. The board has proposed an initial default contribution amount of 5% of employee compensation per paycheck. There is also an annual auto-escalation of 1%, up to a max of 10%. Employees will have the ability at any time to change the amount they want to defer through payroll.

The initial $1,000 contributed will go into an Emergency Savings Account for the employee. 

Looking forward

Paychex will continue to monitor the situation and provide updates when information is available. Maryland businesses can also open a retirement plan such as a 401(k) through a provider such as Paychex to satisfy the mandate.

¹National Institute of Retirement Savings, “The Continuing Retirement Savings Crisis”

²U.S. Census Bureau, “Data by Enterprise Employment Size: U.S. & States.”