Written by Alverta “Sandy” Steinwedel
Per the United States Census Bureau, the number of Americans age 65 or over could increase to 73 million by 2030 with life expectancy of 79 years. You have to ask: do you have the financial stability to retire? Sadly, half of the population does not have enough saved to retire and approximately 37% of employees do not have any retirement savings at all. Because of this issue, six states including Maryland took legislative action to assist employers and employees be better prepared for retirement.
In 2016, Governor Hogan signed into law HB 1378, Maryland Small Business Retirement Savings Program and Trust. The bill required Maryland employers who have been in business for at least two years to provide a retirement savings program, through the Maryland Saves program or privately, to their employees. Even though the program was passed during the 2016 session, the launch happened on 9/15/22.
Many businesses were notified by the Maryland Saves program by email or mail because it is a requirement for all Maryland businesses to register. As an incentive for businesses to complete the mandatory registration, the Maryland Department of Assessments and Taxation will waive the $300 annual Form 1 fee starting with 2023. However, the business MUST enroll or certify they have a private employee retirement savings plan by 12/1/22. This incentive is available to businesses every year as long as they continue to offer a retirement plan to your employees. It is important to note the retirement savings plan is paid through an automated payroll system.
Many employers have been hesitant to offer a retirement plan to their employees because of the time, cost and liability. The Maryland Saves can provide business owners with a no-cost savings program that only takes about 15 minutes to set up. The law does not require businesses to use this option; however, for business who do not currently have a retirement plan, it could cost between $500-2,000 to set up a retirement plan with a private financial institution.
Small to mid-size employers are always looking for new benefits to compete with larger firms, but adding a retirement program:
- Will help attract and retain employees.
- ROTH IRAs – so they move with the employee.
- Employee has control over their accounts.
- Percentage rate can be 1-10% gross wages.
- Built-in emergency savings feature.
In conclusion, any business owner, including sole proprietors and contract employees (1099), who have not received information about the mandatory program, need to:
- Request an access code to begin registering. Could take up to 45 days. As long as the business starts the process by 12/1/22, they should qualify for the $300 fee waiver.
- Certify a business offers a qualified retirement program to their employees.
Once the employer enrolls, Maryland Saves will inform the employees that their employer has decided to participate. When the employee is notified, the employee will be provided an access code that will allow them to log on to their Maryland Saves account to change their contribution amount, choose other investment options or opt out of the program entirely. If the employee does not log into the site, they are automatically opted-in at the 5% deduction. It is important to stress to employees to access the employee section of the website.
