Maryland’s State-Run IRA Bill Heads for Governor’s Signature

With time running out on its 2016 legislative session, the Maryland House has passed the state’s auto-IRA bill by a veto-proof majority.

That, coupled with the unanimous vote in support by the Old Line State’s Senate earlier in the week, makes it almost a foregone conclusion that Gov. Larry Hogan (R) will not bother vetoing the legislation, which would establish the Maryland Small Business Retirement Savings Program.

What’s in the Bill

The legislation is the product of stakeholder deliberations that have been taking place in Maryland over the course of the past few years. In 2014, then-Gov. Martin O’Malley (D) created the Task Force to Ensure Retirement Security for All Marylanders. The task force, chaired by former Lt. Gov. Kathleen Kennedy Townsend, issued a report in February 2015 that amounted to a call for state action to address the retirement plan coverage gap in the private workforce, but was light on specifics.

In September 2015, the leaders of the Maryland General Assembly created the Commission on Maryland Retirement Security & Savings to drill down on the real reasons small businesses were not offering retirement plans for their workers.

As for the reach of that legislation, if the employer meets the requirements in the legislation – namely that the business adopts or maintains either an auto-IRA program or a full blown employer-sponsored retirement plan – then their annual reporting fee ($300 in most cases) is waived. The bill, which applies only to employers with 10 or more full-time employees that use an automated payroll system or service, also creates a state-run auto-IRA program that businesses can use as an option to meet the requirements.

Other State Initiatives

In recent years, state governments have become focused on increasing access to retirement plans for private sector workers. Maryland is the latest state – behind Illinois, Massachusetts, and Oregon – to pass similar legislation in the past few years, including Washington State, which launched a small plan marketplace last year, an approach recently embraced by New Jersey.

Furthermore, California and Connecticut are making serious pushes to finalize their own programs as the states wrap up their 2016 legislative sessions in the coming weeks. In fact, approximately half the states are currently considering measures to close the retirement coverage gap.

At President Obama’s direction, last November the Labor Department unveiled a proposed rule to clarify ERISA’s application to state-run IRA programs, in the process tilting the playing field in favor of those programs in competition with the private sector.

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