What is MarylandSaves?
If you’re a business owner in Maryland, the MarylandSaves program has likely already been on your radar. MarylandSaves is a state-mandated retirement program that aims to make it easier for employees to save for their future while helping employers stay IRS-compliant. While the program is known for being a great starting point that provides the basics, it may be too limited for businesses that are looking for more robust features to maximize their growth. No matter what route you choose, it’s important to understand how the state-run program can impact your company and what’s available for you.
Key Deadlines and Time Frame
MarylandSaves officially launched in September 2022, and by that deadline, employers were expected to have either:
- Registered or certified their exemption through the program’s platform
- Chosen a qualified, private-run retirement plan like a 401(k) or or 403(b)
It’s important to also note that:
- Employers are notified officially by either MarylandSaves or the Maryland Secretary of State when it’s their time to register (but they can also apply before they’ve given a specified date if they’d like).
- Annual recertification for benefits like the SDAT waiver is automatic as long as you’re registered for and maintain your MarylandSaves plan.
Who is Required to Participate in the MarylandSaves Program?
MarylandSaves applies to most for-profit and non-profit businesses, but to be more specific, employers generally will have to register if they:
- Have been in business for at least two years
- Have employees 18 or older
This program is also unique because self-employed individuals or those that work for an employer that doesn’t offer MarylandSaves can voluntarily join the state-run program and contribute to your own Roth IRA.
Attributes and Directives Employers Need to Know
Employer Costs & Obligations
A good part about MarylandSaves is that there is no cost for employers to offer the program. Employers don’t have to worry about managing investments or matching contributions, but they do have to handle payroll deduction processing, updating employee information, and ensuring their team is kept up to date on changes.
SDAT Annual Filing Fee Waiver
Employers can get their $300 SDAT Annual Report filing fee waived if they are in good standing with the program. This is a big incentive for those who are thinking of registering, and even if you already offer a retirement plan, you can still get the waiver. You just have to certify your exemption first, and then apply for recertification yearly.
Automatic Enrollment and Auto-Increases
MarylandSaves encourages gradual savings. Employees are automatically enrolled into the plan at a 5% contribution rate (unless they opt out) and their contributions will automatically increase by 1% each year, until they reach the 10% cap.
Employee Opt-Out & Contribution Changes
Participation is completely voluntary for employees, but because of automatic enrollment, they will have to opt out if they don’t want to be part of the program. They also can lower or raise their contribution rate, or pause their contributions entirely at any time through their MarylandSaves account.
Investment & Fee Structure
State-chosen program administrators are the ones who manage the Roth IRA accounts, ensuring that investments and fee structures stay relatively low-cost and straightforward. There is a tradeoff to this though: This means that a small menu of investment options are offered, and employees won’t get access to more diversified funds like they would with a 401(k). On the employer side, this also means less flexibility and control, which isn’t ideal for scaling.
Are there Penalties for Noncompliance?
Currently, Maryland is one of the few states that doesn’t have financial penalties for noncompliance. But just because things are low stakes now doesn’t mean that there aren’t things you’ll miss out on like the SDAT fee waiver or follow-up notices or updates from the state. The best move is to still take action now while you can because legislation can introduce penalties at any time.
What are My Other Retirement Plan Choices?
For businesses that are just starting out with a retirement plan, MarylandSaves can serve as a good jumping off point. But, in the long-term, they might need something more robust to meet their evolving needs. That’s where alternative plans like a 401(k) or Safe Harbor plan can help significantly.
401(k) Plans
401(k)s are the most popular plan types, primarily because of their flexibility and savings opportunities. This type of plan allows for higher contribution limits than a Roth IRA, along with customizable plan designs and options for tax credits and other tax advantages. The best part is business owners can also make contributions themselves, maximizing the potential of a plan.
Safe Harbor 401(k)
A Safe Harbor 401(k) is similar to a traditional 401(k), but slightly differs as it’s designed for business owners that want to maximize contributions and become exempt from annual IRS nondiscrimination testing. Because this plan automatically satisfies certain IRS rules, administration is much simpler, and owners don’t have to worry about costly consequences or processes.
SIMPLE IRA
A SIMPLE IRA is known to be simpler to set up than a 401(k), but often comes with design and contribution limitations. It can be a great option for businesses that want to start their retirement strategy small, and then eventually convert it into a traditional 401(k).
What Do Employers Need to Do Now to Prepare for and Participate in the MarylandSaves Program?
If you plan on participating in MarylandSaves, here’s what to do:
- Register your business: You have to visit the MarylandSaves website to get this done. Make sure to have all the documentation you need beforehand to make the process easier.
- Update your employee roster: This seems like a no-brainer, but there are actually many employers who don’t have updated lists of everyone who qualifies as an employee. Make sure yours is up to date so you can easily upload it when it’s time.
- Coordinate with payroll: No matter what choice you go with, you’ll have to coordinate with payroll to ensure deductions happen properly for enrolled employees.
- Confirm MarylandSaves is your final choice: Because of the variety of plan choices out there, you’ll want to confirm that the state-run option is the best for your business. Don’t forget to explore other plans like 401(k)s, SIMPLE IRAs, and even Safe Harbor 401(k)s because you might find that these have different benefits and impacts on your business compared to the state program.
- Communicate with your employees: Educate your team on their options and what to expect from the program.
Conclusion
No matter how you go about it, remember that offering a retirement plan is more than just checking a box – it’s a crucial step towards building a more financially stronger business. MarylandSaves can be your key to gaining this security with different features like the SDAT fee waiver and investment selections. But if you find that it isn’t for you, there are also other types of plans to choose from. The ultimate goal is to decide on the best option that allows for more long-term value for your specific business needs.
If you decide to go the 401(k) route, Ubiquity is here to help you. We offer flat fee, customizable 401(k) solutions that are designed to provide you with more flexibility and profitability, while keeping compliance and administration as simple as possible. With us, you can finally focus on growing your business, while we handle the hard parts of your 401(k)s.
