What is the Maryland Small Business Retirement Savings Program

The Maryland Small Business Retirement Savings Program provides a state-facilitated retirement savings option for small business employees without access to employer-sponsored plans. It mandates eligible employers to enroll their employees, who can then contribute to individual retirement accounts via payroll deductions. This program aims to enhance retirement security across the state, making it easier for workers to save and manage funds for their future, with minimal administrative burden on businesses.
Author: Penelope Team

The MarylandSaves Small Business Retirement Program is a state-sponsored initiative designed to help employees of eligible businesses, as well as self-employed individuals, save for emergencies and retirement. The program provides an automatic WorkLife Savings Account, which is easy to facilitate.

Maryland is requiring eligible employers to enroll in the MarylandSaves retirement program as part of a broader initiative to address the retirement savings gap. Many small businesses don't offer retirement plans due to the cost and complexity of setting them up and managing them. This can leave many employees without a convenient way to save for their future.

By requiring eligible employers to enroll in the program or offer an alternative retirement plan, Maryland is encouraging more workers to save for retirement. Read this guide to learn more about the requirements and what alternatives exist for your Maryland-based small business.

What do Employers in Maryland Need to Know About the MarylandSaves Retirement Program?

Employers in Maryland should be aware of the following key points regarding the MarylandSaves retirement program:

  1. Eligibility and Requirement: In Maryland, if you are a business that has been in operation for at least 2  years, have at least one W-2 employee, and use an automated payroll system then you must enroll in the MarylandSave Retirement Program or offer an alternative retirement plan option for your employees by December 31, 2024.
  2. Easy Implementation: The program is designed to be easy to facilitate, with a fast and secure registration process that works seamlessly with any payroll process. The state also waives a $300 annual registration fee for employers who sign up.
  3. Employee Ownership: The accounts and the money saved belong to the individual employees. This means if they change jobs, the money and the account go with them.
  4. Compliance: Beginning in mid-2022, Maryland required businesses to offer a retirement plan to their employees. Compliance with this requirement is important to avoid potential penalties.
  5. Flexibility: While MarylandSaves will require eligible employers to establish a retirement savings plan for their employees, businesses also have the option to establish their own retirement savings plans instead of using the state-provided plan.

What if my Business Offers a Retirement Plan Already?

If your business already offers a retirement plan, you are not required to enroll in MarylandSaves according to the requirements set by Maryland's state law. Qualified plans include:

  • A plan qualified under Internal Revenue Code section 401(a), including a 401(k) plan.
  • A qualified annuity plan under section 403(a).
  • A tax-sheltered annuity plan under section 403(b).
  • A Simplified Employee Pension plan under section 408(k).
  • A SIMPLE IRA plan under section 408(p).
  • A governmental deferred compensation plan under section 457(b).

However, an employer-sponsored retirement plan does not include payroll deduction IRAs. If your business offers a qualified retirement plan you can certify your exemption through the MarylandSaves website here.

Should Maryland Business Owners Consider Other Retirement Plans?

While the MarylandSaves program offers a simple, cost-effective way for small businesses to provide their employees with a retirement savings plan, there are several reasons why a small business owner in Maryland might consider offering a different retirement plan:

  1. Greater Control: Some business owners may prefer to have more control over the retirement plans they offer. For example, they may want to customize the investment options or match contributions.
  2. Maximizing Contributions: Certain types of retirement plans, such as 401(k)s, allow for higher annual contribution limits compared to the IRA-based MarylandSaves plan. This could be a significant advantage for business owners and employees looking to maximize their retirement savings.
  3. Tax Advantages: Depending on the type of retirement plan, there may be different tax advantages available. For example, with a traditional 401(k) plan, employer contributions are tax-deductible, which can help reduce the company's tax liability. State-sponsored plans also are not eligible for Secure 2.0 tax credits - which can save businesses up to $16,500 over the first three years of establishing their new retirement plan.
  4. Employee Retention: A comprehensive, employer-sponsored retirement plan can be a valuable tool for attracting and retaining top talent. While the MarylandSaves program provides a basic level of retirement savings, other plans might offer features that are more appealing to employees, such as employer matching contributions.
  5. Financial Advisor Support: Some business owners may prefer to work with a financial advisor to set up and manage their retirement plans. This can provide personalized support and advice that isn't available through the MarylandSaves program.

Overall, the MarylandSaves program is a good option for many small businesses. It's important for each business owner to consider their specific circumstances and needs when deciding on a retirement plan.

Compare Penelope's 401(k) Retirement Plans to the Maryland Saves Retirement Program

Penelope has two affordable retirement plan options for businesses of all sizes: The Safe Harbor 401(k) and the Starter 401(k). If you are looking to make employer contribution matches, then the Penelope Safe Harbor 401(k) Retirement Plan may be a better plan option for you. The MarylandSaves program does not allow for employer matches, which means that employees will be responsible for contributing the entire amount to their retirement savings.

Additionally, the MarylandSaves program has lower contribution limits compared to traditional 401(k) plans, meaning that businesses and employees may not be able to save as much for retirement.

Talk with a Penelope 401(k) Specialist

Before setting up a retirement plan for your Maryland business, make sure you consider all of your options. If you are looking to offer a retirement with higher contribution limits or have the ability to set eligibility preferences and take advantage of tax credits, get in touch with our retirement specialist to learn more about Penelope's retirement plans. 

We can help you decide which plan is the best fit for your business and provide support throughout the entire setup process. With Penelope, you can feel confident that your employees are set up for a secure financial future. 

So, if you're looking to offer a comprehensive retirement plan for your employees, consider Penelope's 401(k) options as an alternative to the MarylandSaves program.

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