Nearly one million private-sector employees lack access to an employer-sponsored retirement plan in the state of Maryland. To help close the retirement savings gap for employees in the state, Maryland passed legislation to establish a state-run retirement savings program for private-sector employees.

MarylandSaves provides an easy and automatic way for Marylanders to save for their future. In this article, we’ll answer some questions you may have about MarylandSaves and explain how it affects Maryland businesses.

How Does MarylandSaves Work?

MarylandSaves is a government-sponsored retirement plan that launched in November of 2022. Since its inception, Maryland employers who meet certain criteria are required by law to offer a qualified, employer-sponsored retirement plan or enroll their employees in the program.

Maryland employees will contribute to the program through automatic deductions from their paychecks into a Roth individual savings account (Roth IRA) unless they choose to opt out. The money in the account will grow tax-free, and employees won't have to pay income tax on any money they withdraw from their account during retirement. The default savings rate begins at 5% and increases by 1% annually up to 10%, but each individual can elect a higher or lower percentage.

The program is overseen by the Maryland Small Business Retirement Savings Program.

Which Businesses Are Affected?

According to the MarylandSaves website, employers who meet the following criteria are required to register for the program:

• Employs at least one W-2 employee
• Has been in business for at least 2 calendar years
• Uses an automated payroll system

Employers who already offer a qualified plan or choose to start one can certify their exemption from the program.

Registration Deadline

Employers can register their business for MarylandSaves at any time. The state will contact employers who meet the criteria to let them know their registration deadline.

Penalties

The program currently does not penalize non-compliant businesses.

Credits

The state offers a tax incentive for employers who do participate. Every year that a business is actively facilitating the program for their employees, Maryland Department of Assessment and Taxation will waive its $300 annual report filing fee.

Who Is Eligible to Save With MarylandSaves?

Individuals who are 18 years or older are eligible to participate in the MarylandSaves program. The program is voluntary for employees, and they can change their contribution amount or opt out at any time.

Expanded Retirement Savings in Maryland

The MarylandSaves program gives employees access to one of the most tax-efficient ways to save for retirement. Contributions made directly through payroll deductions simplify the process of setting aside funds for retirement.

The program requires businesses that are two years old and using an automated payroll system to either participate in the program or certify an exemption, so it’s important for Maryland employers to familiarize themselves with the program details and requirements.