On Sept. 15, Maryland launched its new “MarylandSaves” paycheck savings program, allowing thousands of small business owners and more than a million residents they employ a new way to save for emergencies and retirement.
The program will offer workers throughout the state the opportunity to start a personal WorkLife Savings Account automatically funded from their paychecks. The service is free for businesses and the state is waiving an annual $300 filing fee for those businesses that enable automatic employee enrollment. Employees can opt out at any time, and the accounts are portable.
“MarylandSaves is an advance on traditional retirement savings,” said MarylandSaves Board Chair Joshua Gotbaum. “It’s automatic savings from each paycheck, savings that help with life’s emergencies now and can keep helping after people retire and need it most.”
WorkLife Savings Accounts are Roth IRAs funded by employees through payroll deductions and are under each saver’s control. Savers will have multiple investment options to choose from and can decide at any time to change their savings rate, change their investment options, or opt out entirely. They can also withdraw their money or take their account with them when they change jobs. However, savers don’t have to do anything: if they don’t opt out, 5% of their paycheck will automatically be saved. The first $1,000 will be contributed to an emergency savings fund, and contributions beyond that will be invested in a target date fund based on the age of the saver.
What’s different
In a statement announcing the new program, the state points out it is working toward providing two specific features that would set it apart from other state-based Roth IRAs.
One would help program participants make the most of Social Security by “building a bridge.” As participants near retirement age, the program is developing a feature to offer savers the option to withdraw money from their MarylandSaves account to help them postpone filing for Social Security benefits (If a person defers and doesn’t file for Social Security at age 62, it increases their payment by approximately 8% for each year until age 70). Using their WorkLife Savings Accounts to create a “Social Security bridge” is intended to help participants receive larger Social Security payments when they do file.
The second unique feature is a plan to offer conversion to a monthly check at retirement. MarylandSaves is developing the ability in the future to enable participants to automatically convert their WorkLife Savings Accounts to a monthly paycheck when they are ready to retire, in an amount estimated but not guaranteed, to last a saver’s lifetime.
“Getting a monthly check will take much of the guesswork out of retirement,” said Gotbaum.
The “Social Security bridge” and “managed payout” options are not expected to be available for several years and the Board may adjust those options.
MarylandSaves said it will notify employers and participants as these options become available.
Streamlined sign-up
“We’ve worked hard to make MarylandSaves hassle-free for businesses,” said MarylandSaves Executive Director Glenn Simmons. “Registration is free, quick, and easy—and businesses that sign up [by Dec. 1] this year will save $300 next April 15th. They can register and sign up their employees online, and in many cases, use their payroll processors.”
Businesses that already offer a qualified retirement savings plan to their employees will also qualify for the fee waiver.
The program is being administered by a team of established financial services firms including Vestwell and BNY Mellon. All investment options are professionally managed by BlackRock, Lincoln Financial Group, State Street Global Advisors, and T. Rowe Price.
Pilot program began in July
Since July, a group of Maryland small business owners and non-profit leaders from various industries and regions have been testing the MarylandSaves program. Their reviews have been enthusiastic, according to the press release.
“Atwater’s been on a 23-year mission to provide every employee a good job with great benefits. A retirement plan has always been a part of that vision. With MarylandSaves, we’ve achieved that while staying close to our handcrafted, local roots,” said Justin Brady, human resources manager at Maryland’s Atwater’s markets.
Josseline Rodriguez has worked at the Caliente Grille in Annapolis for 6 years and appreciates the emergency savings fund she is building in her WorkLife Savings Account. “It really feels amazing that I know that I’m saving money for my future and for my family,” she said, “because you never know what can happen, and you might need that money, and you have it whenever you need it.”
Bipartisan legislation created the Maryland Small Business Retirement Savings Board and charged it with developing an automatic payroll savings IRA program for Maryland businesses that don’t offer a retirement plan to their employees. The Board developed the program and under Maryland law its members are legal fiduciaries responsible to program participants.
The program is designed to be paid for by fees on invested accounts, not taxpayer funds. The State of Maryland has loaned funds to MarylandSaves to cover startup costs.
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• Opinion: Maryland’s State-Run IRA Is Different, Better, and Still Less Than Optimal