Last Friday marked not only the start of a new month — it was also the day on which Maryland became the latest state to activate a program that provides retirement benefits to private-sector employees whose employers do not.
The Maryland Small Business Retirement Savings Program and Trust, established by legislation which Gov. Larry Hogan (R) signed into law on May 10, went into effect on July 1. The program creates incentives to encourage private-sector employers to make the program available to their employees.
Employers in Maryland still may offer a retirement plan themselves. Employers with 10 or more employees that use an automated payroll system or service, and that do not offer their own plan, must either participate in the state program or pay an annual filing fee. The state program also creates a state-run auto-IRA program that businesses can use as an option to meet the requirements.
The law also establishes the Maryland Small Business Retirement Savings Board to implement, maintain and administer the program and the trust. It requires the board to ensure that the program is not preempted by federal law, establish procedures and disclosures to protect the interests of participants and employers and disseminate information about the program to employers and employees before enrollment.
Note, however, that while the act creating the program is now in effect, the program may not be implemented until the board obtains an opinion from legal counsel or from the federal government that the plan, trust, administrative arrangement, and investment offerings implemented under the bill qualify for favorable federal income tax treatment under the Internal Revenue Code.
Other State Initiatives
In recent years, state governments have become focused on increasing access to retirement plans for private sector workers. Maryland and Connecticut are the latest states – following Illinois, Massachusetts, and Oregon – to pass similar legislation in the past few years. Washington State and New Jersey have both launched small plan marketplaces. Approximately half the states are currently considering measures to close the retirement coverage gap.
