MarylandSaves Launches with WorkLife Savings Accounts

As planned, another state-run IRA program for private sector workers has launched—with some good news for early employer adopters.

The announcement notes that while the services are free for businesses, employers that enroll with MarylandSaves by December 1st of this year won’t have to pay the State of Maryland’s $300 annual report filing fee for 2023. Better yet, businesses that already offer a qualified retirement savings plan to their employees will also qualify for the fee waiver.

According to a Nov. 22, 2021 announcement by the program’s board, MarylandSaves planned to begin offering its new automatic workplace retirement and emergency savings program this summer—ultimately besting that goal by about a week. Created by legislation that went into effect on July 1, 2016, MarylandSaves is a state-sponsored program that seeks to make it easier for businesses to offer their employees a retirement savings plan. The program requires employers with 10 or more employees that use an automated payroll system or service to either offer a retirement plan or sign their employees up for the MarylandSaves program. 

The program refers to “WorkLife Savings Accounts”—Roth IRAs funded by employees through payroll deductions, with access to multiple investment options—which can be changed. Of the 5% that will be automatically deducted from their pay (they can opt out at any time) 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.

Different ‘Says’

The launch announcement explains that while “most retirement savings programs leave savers on their own to figure out how much they can afford to spend in retirement, MarylandSaves will be different in two ways”:

As participants near retirement age, the program is developing a feature that will provide a “Social Security bridge” to help workers 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).
MarylandSaves is also 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.

However, the announcement notes that 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 will notify employers and participants as these options are available.

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. The program is designed to be paid for by fees on invested accounts, not taxpayer funds, according to the announcement. The State of Maryland has loaned funds to MarylandSaves to cover startup costs.