TOP TIP: A New (Mandatory?) Retirement Savings Benefit for Maryland Employees
Employers of Maryland employees recently may have received various notices regarding a new state program – MarylandSaves. While employers tend to view “mandatory” (more on that later) government programs with some skepticism, this program is intended to benefit Maryland employers and their employees by encouraging saving for retirement and providing an easy-to-use retirement savings option for those employers who do not already have one – at no cost to and with minimal effort from the employer.
MarylandSaves has a website that includes helpful FAQs for employers, along with guides and other resources, as well as a registration portal. There is also a helpline: 1-833-811-7437 . We summarize some of the most significant information from the FAQs here, along with additional guidance that we obtained from the Executive Director of MarylandSaves, Glenn Simmons.
“Mandatory” Participation for Covered Employers. The law that created this program requires all entities engaging in business in Maryland that meet the following criteria to participate in this program:
- They have been in operation for at least 2 calendar years
- They have at least one W-2 employee
- They do not provide a retirement savings option to their employees, and did not provide one within the past two calendar years
- They use an automated payroll system
If the employer participates in the program or has an employer-sponsored retirement plan (even if the plan does not cover all employees), its annual state business filing fee (required by corporate law) will be waived. Notably, although the law “mandates” participation by covered employers, the only penalty for failing to participate is that the filing fee will not be waived.
In order to receive the business filing fee waiver, employers should use the MarylandSaves portal to register or to certify that they offer another qualified plan. MarylandSaves will provide the list of business that qualify for the waiver to the State Department of Assessment and Taxation (SDAT) by December 1.
There is no cost to the employer, and employers do not contribute to the program. They also should not advise employees on their MarylandSaves account – rather, questions should be referred to the program or the employee’s financial/tax advisor.
Who Is a Covered Employee? Technically, all employees of a covered employer are eligible to participate except the following:
- Employees “engaged in interstate commerce such that they are beyond the legislative reach of the state.” We interpret this as being designed to prevent conflict with the Constitutional authority of the federal government to regulate interstate commerce. That prevents inconsistent legislation from one State being applied in another State.
- Employees covered under the Federal Railway Labor Act.
- Employees who are already eligible to participate in a qualifying retirement plan.
- Employees who are covered by a valid collective bargaining agreement providing for a multi-employer retirement plan.
- Employees who are under 18 years old at the beginning of the calendar year.
In an attempt to simplify, the FAQs state that employees whose employment is based in Maryland or who have income in Maryland are eligible for the program – including employees living in other states. Frankly, that is not an entirely helpful definition, and does not address the interstate commerce exception above. However, we sought further clarification from Executive Director Simmons, who confirmed that a reasonable approach to meeting this definition would be to use the list of employees who are counted for purposes of Maryland unemployment insurance coverage and eligible to receive Maryland UI benefits.
Covered Employees – Automatic Enrollment and Opting Out. Covered employees must be automatically enrolled in the program. Initially, the employer will use the registration portal to provide their list of covered employees to the program – a process that reportedly takes about 15-20 minutes. For employees who are hired after the employer’s initial registration, Executive Director Simmons acknowledged that employers who utilize probationary or introductory periods could wait until the end of the period before enrolling those new employees.
Once the employee is enrolled, the program will notify them of their enrollment and that they have 30 days in which to opt out of the program. Employees may also opt out of or re-enroll in the program at any time.
If they do not opt out, automatic contributions will be made by payroll deduction. The amount of the contribution will be set at a default amount unless the employee specifies otherwise. The employer must update their payroll processing to include the employee’s contribution and any subsequent changes of which they are notified by the program (e.g. if the employee later opts out or changes their contribution amount).
Deadline for Compliance? There is no technical deadline by which covered employers must comply, although Executive Director Simmons states that they would like employers to enroll their employees as soon as possible.