Maryland Saves helps employers offer retirement plan to employees 

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With a tight labor market, employers need a wide variety of incentives to attract and retain talent including offering a retirement plan.

In Maryland, employers and employees can both benefit from Maryland Saves, a workplace savings program sponsored by the state’s Small Business Retirement Savings Program. The state’s program is the fifth in the nation offering a retirement savings plan to employers of all sizes that do not currently offer one to employees. Nearly one million private sector employees in the state do not have access to a retirement savings plan sponsored by their employers.

The concept was first inspired by the Retirement Security Project initiative from the Brookings Institute which focuses on promoting solutions for millions of American workers who do not have retirement savings or an employer offering a plan. Oregon was the first to offer a program followed by Illinois, California and Connecticut.

The Maryland General Assembly passed a bill in 2016 requiring all employers in the state to offer a payroll deductive retirement plan but the bill did not go into effect until Maryland Saves launched in September. Maryland is the first state without financial penalties for noncompliance. Businesses that offer a retirement plan through the program will qualify for a $300 waiver of the annual report filing registration fee. The employers will qualify for the waiver every year they participate in Maryland Saves or offer another qualified plan to their employees.

“The state programs are the only programs where there is absolutely zero cost for the employer to offer a retirement plan,” said Glenn Simmons, Maryland Saves’s executive director/CEO. “All the fees are paid out of the saver’s accounts directly and that is typical. Any time you buy a mutual fund or have any investment like that, the fees are paid that way. Because we are a state-sponsored nonprofit, we don’t have a large overhead to cover. Our fees are very low to begin with.”

As of mid-December, the program had more than 1,200 businesses enrolled with a 30-day waiting period for employees to start making contributions through their paychecks. “We are way ahead of projections,” Simmons said. “… We are starting to see things growing exponentially. We were thinking it would take us well over a year to get 1,200 (businesses) or to even get a thousand businesses enrolled but we are already at 1,200.”

Simmons notes there are several reasons why some employers do not offer a retirement plan to their employees including being too expensive, they are not familiar with the field and not wanting to take on the legal responsibilities. Maryland Saves is a free program that only takes a few minutes to sign up for and the program’s board assumes all the fiduciary responsibilities.

“It is very difficult right now for small businesses to attract and retain talent so offering a retirement plan that doesn’t cost anything helps small businesses be more competitive,” he said. “They are offering a plan that doesn’t cost them anything.”

A May survey by Sagewell Financial found 27% of older adults between the ages of 55 to 67 had less than $10,000 saved for retirement with 40% having under $50,000.

Residents do not have to wait for their employer as individuals can also sign up. The program is set up so a participant can link a checking or savings account to make automatic or manual payments. The accounts are set up as a Roth IRA so if the employee gets a new job the account goes with them and the employer stops making contributions. This type of account also allows participants the opportunity to take some money out if they have some unexpected expenses.

“Coming out of COVID and the inflationary times we are in, a lot of people are saying ‘I can’t afford to save’ but really most people can,” Simmons said. “You can start with as little as one percent of your salary all the way up to 10 or you can make a one-time maximum contribution.”