Maryland Adopts Mandatory Retirement Plan for Employers

Maryland House Bill 1378 and Senate Bill 1007 set up the Maryland Small Business Retirement Savings Program and Trust, which provides for automatic enrollment in individual retirement accounts (IRAs) of private sector employees. The program took effect on July 1, 2016. Employers with at least 10 eligible employees are required to enroll in the program, which also automatically enrolls employees to contribute 3 percent of their pay to the fund. This new legislation has raised concerns over the process of enrollment and the automatic nature of the deductions from employee payroll. However, employees have the option to opt out of the plan, and employers are not required under the law to contribute anything to the IRAs. In fact, employers are not permitted to contribute additional amounts to the employees’ IRA under this program. The new legislation is aimed at addressing the looming issue that many Marylanders do not have an adequate savings plan for retirement. It follows a line of federal initiatives to encourage retirement savings and provide for easier options for workers to contribute to a retirement plan.

All private employers are required to participate in the program if they have at least 10 employees who are over the age of 18, work at least 30 hours per week, do not already participate in a sponsored plan, and are not part of a multiemployer retirement plan through a collective bargaining agreement. If an employer already offers a sponsored retirement plan for employees or has terminated such plan within the past two years, it may be exempt from participating in the program. In addition, if an employer has not been constantly in business during the present and last calendar year, it may not be required to participate in the program.

The good news about participation in the program for employers is that the state will waive the $300 annual filing fee for business entities. This exemption is also available to employers who offer a sponsored retirement plan for employees. Employers can also breathe a sigh of relief that the law makes expressly clear that they are not accepting any fiduciary duties on behalf of employee participants in the program and have no responsibility for the administration of the program or an employee’s decision to participate or not in the program. At this point, there are no established penalties for employers who fail to comply with the program.

To make sure that your company is prepared to comply with the state law for employee retirement funds, contact Simms Showers LLP for a consultation.