MarylandSaves Workplace Retirement Program Requires Businesses with at Least 1 W-2 Employee to Participate

The Maryland Small Business Retirement Savings Program (MarylandSaves) offers benefits for employers and employees. Following the launch of a pilot, 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?

Maryland has more than 618,000 small businesses operating in 2023, according to the Small Business Administration, which means nearly half the state's workforce is employed by private-sector small businesses.

Nationally, according to Paychex payroll and retirement data from January 2023 to June 2023, just over one-third of small-business employers (36.9%) with up to 49 employees offer some type of workplace retirement plan. One determining factor is business size, as businesses, with 20-49 employees offering retirement plans at a rate three times more than businesses with 1-4 employees.

The U.S. Bureau of Labor Statistics reported in March 2022 that just more than half of the workers (52%) with access to a retirement plan participate in the plan.

The MarylandSaves program can help start to reverse the trend for employees who, according to the most recent data from the Federal Reserve have $65,000 in retirement savings.

What Employers Should Know About MarylandSaves

Maryland requires employers with at least one W-2 employee to participate in the MarylandSaves plan, plus the business has to have been in operation for at least two calendar years, uses automated payroll system, and does not currently offer a qualified retirement plan such as a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b).

Employers have until Dec. 31 of the year after meeting the employer requirements to enroll in the plan.

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 fully participate in Maryland Saves (e.g., register and submit payroll contributions) or offer another qualified plan will have the $300 annual report filing fee waived by the state. Employers can opt out of offering MarylandSaves if they offer their own employer-sponsored retirement plan that satisfies the mandate. They can claim the $300 annual filing fee waiver annually on the Maryland Saves website. All other nonexempt employers must pay the annual $300 fee.

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 MarylandSaves

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

• Participants must be 18 years old
• Employees must receive W-2 wages in Maryland

Employees will be enrolled automatically but can opt out of participating in the program at any time.

How Does MarylandSaves Work?

Participating employees will have a default contribution amount of 5% of their wages 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 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.