MarylandSaves is an initiative to increase Maryland workers’ access to retirement savings accounts. According to a 2018 study, 42% of American adults are not putting aside money for their retirement. MarylandSaves aims to remedy this by creating automatic retirement IRAs and emergency savings accounts at no cost to the employer. MarylandSaves initially started as a pilot program and went into full effect on September 6.
If you are a Maryland employer using an automatic payroll system, you may now be required to establish your own 401(k) plan for employees or sign your employees up for an automatic IRA through a state-run trust.
This program is cost-free. This means employers do not have to match any portion of employee contributions. Additionally, there are no federal reporting requirements. Although there is a $300 annual filing fee, the Maryland Department of Assessment and Taxation will wave this fee for any businesses that participates in MarylandSaves or can show that they offered a retirement savings plan.
Most employers are now required to provide a retirement savings arrangement for their employees
According to Human Interest, a provider of 401(k) plans, all private-sector employers whether for-profit or nonprofit, who operate in the state of Maryland must comply with MarylandSaves if they:
- Pay their employees through an automated payroll system
- Have been in operation for two years or more
- Do not currently offer an employer-sponsored retirement savings arrangement to their employees and have not done so in the past two years
If you meet these criteria, you have a choice to make. You can choose to create your own 401(k) plan for your employees, or you can enroll your employees in a MarylandSaves IRA plan. If you choose a MarylandSaves plan, enrollment of employees must be automatic upon hire. Employees will be able to opt in and out at will, and if the employee accepts a position with a different company, their MarylandSaves plan will move with them.
More information about MarylandSaves
- There is a default contribution rate of 5% of the employee’s pay with a 1% annual increase in contributions. This annual increase maxes out after 5 years at 10%. Employees are able to choose custom contribution levels. These accounts are subject to IRS contribution limits to IRAs.
- The first $1,000 a worker saves in their MarylandSaves IRA becomes an emergency savings account. After that, additional funds are deposited in an age-appropriate target date fund.
- If the employee retires before age 65, they can choose to receive their MarylandSaves funds first, deferring their Social Security enrollment so they can ultimately receive full Social Security benefits.
- The administrative costs of the plan are paid by fees and investment expenses. These costs can be passed on to employees as long as they don’t exceed 0.5% of the plan’s total assets.
If you have questions about MarylandSaves or creating a 401(k) plan, call Thatcher Law Firm to speak with one of our employment law experts.
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