Maine's Retirement Savings Program - Paper Trails

On June 24, 2021, Maine’s government signed An Act to Promote Individual Retirement Savings through a Public-Private Partnership into law. Created to help against the growing retirement crisis in Maine and across the United States, this act makes Maine the latest state to require certain employers to either provide an employer-sponsored retirement program to their employees or provide their employees the option to contribute to a state-sponsored Roth IRA. More details regarding Maine’s Retirement Savings Program follow.

What is Maine’s Retirement Savings Program

Maine’s Retirement Savings Program requires covered employers to offer an employer-sponsored retirement plan to their employees. If a covered employer does not offer a retirement plan, they must provide their employees the option to contribute to a state-sponsored retirement plan. Additionally, this act creates The Maine Retirement Savings Board, who will oversee the program.

Who must comply with this requirement?

Under this act, covered employers must comply with this requirement. As defined in the act, a covered employer is considered a person or entity engaged in a business, industry, profession, trade or other enterprise in the State, whether for profit or not for profit, that has not offered to an employee, effective in form or operation at any time within the current calendar year or 2 preceding calendar years, a specified tax-favored retirement plan.

Once fully enforced, covered employers with more than 5 employees will be obligated to follow the guidelines set forth in this act. Furthermore, public employers and those businesses with less than 5 employees are exempt from this requirement.

What are the phase deadlines for compliance?

This program is set to begin in late January 2024.  Employers with 15 or more employees must be enrolled or marked exempt from the program by April 30th, 2024.  Employers with 5-14 employees will have until June 30th, 2024 to be in compliance.

Additional details of Maine’s Retirement Savings Plan

• For those businesses that do not offer an employer-sponsored plan, employees will be automatically enrolled in the state-sponsored plan.
• 5% of employee wages will be automatically withdrawn from each paycheck and put into a Roth IRA.
• Employees may choose to increase or decrease this rate.
• The annual contribution rate will increase no more than 1% per year, up to a maximum of 10%.
• Employees will have an opportunity to opt out of the plan.
• Those employees that do opt out will be automatically re-enrolled with the opportunity to opt out again at regular or ad hoc intervals.
• Employers will not be required or allowed to match employee contributions.
• Roth IRA balances would follow workers when switching jobs.
• According to the bill, there will be per employee penalties each calendar year for those businesses not in compliance.

How does this effect my business?

Private businesses in Maine with more than 5 employees need to begin planning to comply with this new program. Your business is already in compliance if you offer a retirement plan to your employees. Should you not already offer a retirement plan, do your research about your retirement plan options for your business. There are certain tax advantages for your business in offering a retirement program. Additionally, the employee benefits of an employer-sponsored plan may outweigh those of this state-sponsored plan. Employees may be able to contribute higher amounts or receive an employer match on their contributions.

If the Maine Retirement Savings Program is right for your business, provide information to your employees about their options to change the contribution amounts or to opt out of the program. Also, it is important to setup your payroll deductions correctly before your business begins participating.

We will continue to make necessary updates as changes are made and the deadlines get closer.