A state-sponsored program requiring employers to offer employees the opportunity to invest in a retirement savings plan took effect statewide on September 15th. This article explains the impact this program has on Maryland employers.
In 2016, the Maryland General Assembly enacted the Maryland Small Business Retirement Savings Trust and Program, referred to as MarylandSaves, to address the large segment of Maryland’s workforce that does not have an established retirement savings plan. Governor Larry Hogan described the legislation as an initiative to increase retirement savings for small business employees, specifically, without burdening the employer with excessive cost.
MarylandSaves requires employers with an automatic payroll system to establish a payroll deposit retirement savings program for employees through a state-run trust or obtain an exemption. This law has very broad coverage: any private sector, for-profit, or nonprofit business operating within the state of Maryland that meets the following criteria is required to participate in the program or offer its own retirement savings program:
- Pays employees through a payroll service or system;
- Has at least one W-2 employee;
- Has been in operation for at least two years;
- Does not currently offer an employer-sponsored retirement savings plan to its employees; and
- Has not provided an employer-sponsored retirement savings plan to its employees in the previous two years.
Employers who do not meet these criteria will be eligible for an exemption.
All Maryland employers are required to either enroll in the program or register for an exemption through the MarylandSaves website. Employers should have received a registration access code from the state of Maryland by mail or e-mail communication. Employers that have not received an access code for registration from MarylandSaves can request one here.
Employers that qualify for an exemption can begin their registration for exemption by providing their EIN and access code, as well as a certification establishing that they either: (1) offer their own retirement savings plan; (2) have no W-2 employees; (3) do not use an automated payroll system; or (4) have been in business for less than 2 years.
Employers enrolling in the program will also need to provide their EIN and access code, along with a list of their employees. Employers will be required to provide basic payroll information necessary to set up the employer’s and their employees’ accounts with MarylandSaves. Once an employer enrolls in the program, individual employees are permitted to opt out and choose not to have funds withdrawn from their paychecks.
Employers that enroll in the MarylandSaves program will have no payment obligations to MarylandSaves and will have no federal reporting requirements. As an additional incentive, the Maryland Department of Assessment and Taxation will waive its $300 annual report filing fee every year that employers are enrolled in the program. The MarylandSaves program does place some administrative burden on employers, however, in terms of registering for the program and keeping its employee list with MarylandSaves up to date. Once enrolled, employers are also required to document their employees’ payroll contributions.
Individuals that are self-employed or are not eligible for the retirement savings plan offered by their employer may also enroll in the MarylandSaves program. To qualify, an individual must be 18 years of age or older, have earned income, be employed in the state of Maryland, and be eligible to contribute to an IRA.
MarylandSaves presently provides FAQs directed to employers and savers. To receive updates from MarylandSaves, sign up here.
For more information about these issues and other employment concerns, contact Caylee A. Henderson or any member of the employment law group.
This has been prepared by Tydings for informational purposes only and does not constitute legal advice.