MD Small Business Retirement Savings Program

by Greg Yoder, CPA

Under a new program, Maryland employers who don’t already offer a retirement plan to their employees will be required to withhold retirement plan contributions from employees’ pay and contribute it to an IRA.

The Maryland Small Business Retirement Savings Program and Trust was established by legislation earlier this year and is expected to be fully up and running by 2018. The goal of the legislation is to increase retirement plan participation and savings among employees who are currently least likely to have adequate retirement savings.

A “covered employee” is any Maryland employee who’s at least 18 years old and isn’t otherwise covered under an employer-sponsored retirement plan. A “covered employer” is any employer who pays employees through a payroll system or service and who doesn’t currently offer an employer-sponsored retirement savings plan. Employers are exempt until the second full calendar year that they’re in business. There are some minor additional exemptions to the covered employee and employer categories, but most Maryland employees and employers (who don’t already have a retirement plan) will be covered.

The system will work by requiring employers to have a percentage (the exact percentage has not yet been determined) of employee compensation withheld and paid into the plan. Employers will not be responsible for making any contributions themselves, and they will not be plan fiduciaries. Employees will have withholding and contributions by default, but they will be able to opt out.

The legislation doesn’t currently include any penalties for failure to comply with the Program requirements, but it does offer an incentive: covered employers who do comply, or already offer an employer-sponsored retirement plan, will have the annual SDAT filing fee (currently $300) waived.