Program Launches To Help Maryland Workers Build Nest Eggs

Saving for retirement has recently become easier for nearly 1 million Maryland workers.

MarylandSaves, a new state program offering automatic payroll deduction for Roth IRAs, launched in September, and officials hope to reach all who are eligible by the end of 2023.

At the program’s start, about 947,000 private sector employees ages 18 to 64 in the state worked for an employer that did not offer a traditional pension or retirement savings plan. Most of those workers will qualify for the new program, which AARP Maryland had championed for more than a decade.

“When you think of all the people with little to no money in the bank for retirement, what’s going to happen to those folks?” asks Tammy Bresnahan, AARP Maryland’s advocacy director. Social Security was never meant to be the only source of income in retirement, so such savings programs are critical for building financial security, she says.

Maryland is the seventh state to offer a state-facilitated savings option, notes Georgetown University’s Center for Retirement Initiatives. Nine others have taken steps to do so.

 Businesses in operation for two years or more with at least one W-2 employee and using automated payroll must offer a retirement plan of some sort—such as a pension, 401(k), 403(b) or a WorkLife Account from MarylandSaves. Part-time and self-employed workers are also eligible.

The program is opt out, says Glenn Simmons, its acting executive director. Unless an employee chooses not to participate or exceeds an income cap for Roth IRAs, employers will automatically direct deposit 5 percent of workers’ gross income each paycheck into a retirement account.

Program automatic

The employee’s first $1,000 goes into an emergency savings fund, and later contributions go into retirement investments.

The contribution will increase by 1 percentage point annually until reaching 10 percent, but employees can adjust their contributions at any time. The maximum contribution for 2022 is $6,000, or $7,000 for those 50 and older. As with other Roth IRAs, contributions to MarylandSaves are not tax-deductible, but withdrawals in retirement will generally be tax-free.

AARP has a representative on the Maryland Small Business Retirement Savings Board, which oversees the program, and helped recruit employers for a pilot of it. AARP is planning a marketing campaign to share details of the program and to urge workers not to opt out.

Simmons says a selling point is ease of use. Accounts offer a limited number of investment options, including ones targeted to a retirement date. Employers pay nothing for the program. Employees pay standard industry investment management and program administration fees.

Proponents say people are more likely to participate in automatic programs than if they had to set up accounts on their own.

That’s been the experience of Keith Rhodes, who with his wife, Stephanie, owns Tri-State Marine, near the Chesapeake Bay in Deale. When Rhodes, 54, bought the boating business in 2020, he decided to offer a 401(k) retirement plan for the first time in the company’s history. None of his 34 employees signed up.

This summer, he tried MarylandSaves. More than half of his staff—from a forklift operator to a master technician—participates. Rhodes speculates that the 401(k) options were confusing and employees might have been wary of a new owner’s plan, compared with a state-facilitated one.

“We had this up and running in no time,” Rhodes says, estimating it takes his bookkeeper just five minutes a week to administer.

Go to marylandsaves.com for more information.

Sarah Hollander is a writer living in Cleveland.

More on retirement savings:

• Work and Save 101
• AARP Issues: Work and Retirement