Maryland Retirement Mandate: MarylandSaves for Employers
MarylandSaves makes most Maryland employers without a retirement plan auto-enroll staff in a state Roth IRA. Deadlines, penalties, and the 401(k) option.
A Maryland business owner once forwarded me a letter with an access code printed on it and a single question: is this real, and do I have to do something about it. It was real. It was from MarylandSaves, and the work it demanded turned out to be smaller than the letter made it feel.
Maryland decided that the retirement coverage gap was something employers could help close without paying for it. If you run payroll in the state and you sponsor no plan of your own, the expectation is that you plug your people into the state program instead. You contribute nothing, you match nothing, and you are not the plan fiduciary.
What follows is who the mandate reaches, the date that actually matters, what happens if you ignore it, how the auto-IRA behaves once deductions start, and the case for sponsoring your own 401(k) instead.
I build the people and records tooling for businesses without an HR department at FirstHR, which is an onboarding and HR platform rather than a payroll or retirement provider. This is general information, not tax or legal advice.
What MarylandSaves Is
MarylandSaves is a state-sponsored payroll deduction IRA program that covered Maryland employers must offer if they do not sponsor a retirement plan themselves. It launched to employers statewide in September 2022 and is run by a state board rather than by the employers who feed it.
The mandate itself is one short section of statute. Maryland Labor and Employment 12-402 requires covered employers to establish the arrangement and to enroll covered employees automatically unless the employee opts out under procedures the board sets (Maryland General Assembly). A separate section, 12-403, lets any covered employee opt out and then re-enroll later.
Maryland is one of a growing group of states running this kind of program. Georgetown University's Center for Retirement Initiatives counted 17 states with an enacted auto-IRA program as of September 2026, and the mechanics rhyme across most of them.
Who the Mandate Covers
There is no employee headcount trigger in Maryland. The statutory definition of a covered employer turns on payroll, business longevity, and whether you already offer a plan, and it contains no minimum number of employees anywhere in it.
The employee side has its own filter. Under the definitions in Maryland Labor and Employment 12-101, a covered employee excludes anyone already eligible to participate in a qualifying retirement plan and anyone under the age of 18 before the calendar year begins.
Two more groups are left out: employees covered by a collective bargaining agreement (a union contract) that provides a multi-employer plan, and certain employees under federal railway and interstate commerce rules.
Government employers are excluded outright: federal, state, county, and municipal bodies and their units are all carved out of the covered employer definition. Everything else engaged in business in the state is inside the frame, whether it operates for profit or not.
The Date on the Calendar
The operative deadline is December 31, and it recurs every year rather than arriving once. Registering and starting to send payroll contributions, or claiming the waiver as an employer that already sponsors a qualifying plan, before that date is what secures the state filing fee waiver for the following year.
| When | What happens |
|---|---|
| September 2022 | MarylandSaves opened to employers statewide |
| December 31 each year | Cutoff to register and start contributions, or to claim the waiver, for the following year's filing fee |
| December 31, 2026 | The next cutoff the program publishes for newly eligible businesses |
| 30 days after an employee is added | The employee decision window closes and payroll deductions begin |
| Each January | Automatic 1 percent contribution increase for employees enrolled at least six months |
Several other states have used staged, one-off compliance dates, where a specific size band gets a specific date and the date then passes for good. Maryland runs a recurring annual cycle instead, which is more forgiving of a late start and easier to miss quietly year after year.
New businesses get a natural grace period from the definition itself. Because a covered employer must have been in business throughout both the current and the preceding calendar year, the mandate reaches a young company only after it has been operating across two calendar years, at which point the program identifies it as newly eligible.
What Skipping It Costs
There is no fine and no per-employee penalty. Maryland built the mandate on a financial incentive rather than an enforcement mechanism, and a December 2024 evaluation by the Department of Legislative Services found MarylandSaves was the only mandatory state auto-IRA program without penalties for noncompliant employers.
The statute is direct about it. Maryland Labor and Employment 12-402(b) provides that a covered employer not in compliance may not receive the waiver of the annual report filing fee. That is the whole consequence, spelled out in the same section that creates the obligation.
I would not treat that as permission to skip it. The waiver is worth more than the registration takes to complete, and a regime this mild may not stay that way.
The Department of Legislative Services has already recommended that lawmakers consider penalties if employer participation falls significantly below other states' rates. An employer who has ignored a state mandate for years is not in a comfortable position if the enforcement posture changes.
How the Auto-IRA Behaves
The defaults do almost all the work. An employee who never opens a single piece of program mail ends up saving 5 percent of gross pay into a Roth IRA, with that rate climbing 1 percent each January until it reaches 10 percent.
The escalation has a condition attached. The automatic increase applies each January only to employees who have been enrolled for at least six months, and any employee can decline the increase entirely while staying in the program. Rates can be set anywhere from 1 percent upward, within federal limits.
The account is a Roth IRA, which matters for two reasons. Contributions come out of pay after tax, so they sit alongside the employee's other post-tax payroll deductions rather than reducing taxable wages. And Roth eligibility is income-limited under federal rules, so a high earner may not be able to use it.
Federal IRA limits also cap the whole thing well below what a workplace plan allows. For 2026 the IRA contribution limit is $7,500 with a $1,100 catch-up at age 50 and over, against a 401(k) elective deferral limit of $24,500 with an $8,000 catch-up, and the Roth income phase-out for single filers runs between $153,000 and $168,000 (Internal Revenue Service).
One design detail is genuinely unusual. The first $1,000 an employee saves goes into an emergency savings fund rather than a retirement investment, and only contributions above that flow into a target retirement date fund. For a workforce with no cash buffer, that ordering is more useful than a pure retirement product would be.
Your Role, and Its Limits
Your job is registration, roster, and remittance. Everything that looks like a retirement plan responsibility, from enrollment conversations to investment selection to withdrawals, belongs to the program rather than to you.
The fiduciary point is the one worth internalizing, because it is the reason this is a payroll task instead of a benefits program. Maryland Labor and Employment 12-402(d) states that compliance and participation do not by themselves create a fiduciary obligation for the employer with respect to the operation of the program or the funds contributed to it.
That is a different world from sponsoring a plan. A 401(k) sponsor is a fiduciary under federal law with real duties around prudence, fees, and monitoring, which is why ERISA obligations occupy so much of a plan sponsor's attention. The state program is designed to keep you out of that role entirely.
The practical consequence is that most of the effort is front-loaded. Registration and the first roster upload take real time. After that, the recurring work looks like keeping employee records accurate, which is the same discipline you already need for benefits administration generally.
Sponsoring a 401(k) Instead
Offering your own plan exempts you from the mandate completely, and it still earns the filing fee waiver once you claim it each year. The statute defines an employer-offered savings arrangement broadly: an IRA, a defined benefit plan, a 401(k), a Simplified Employee Pension (SEP), a SIMPLE plan, or another compliant arrangement the board specifies.
The program applies its own list when it grants the waiver. Its claim form names 401(k) and other 401(a) plans, 403(a) and 403(b) plans, SEP and SIMPLE IRA plans, and governmental 457(b) plans. It excludes payroll deduction IRAs, so offering a payroll deduction IRA alone does not earn the waiver.
The federal tax code makes this more affordable than most owners assume. The retirement plans startup costs credit covers a share of qualified setup and administration costs, worth up to $5,000 a year for three years, with the full percentage available to the smallest employers, plus a separate credit of $500 a year for three years for adding automatic enrollment (IRS).
What you take on in exchange is real. You become the plan sponsor and fiduciary, you generally file Form 5500 annually, and unless the plan uses a safe harbor design you run nondiscrimination testing every year and live with the corrective distributions if it fails.
The reasons to accept that trade are usually about ambition rather than compliance. A workplace plan lets employees defer more than triple the IRA limit, lets you contribute employer money, and lets you use design features the state program has no concept of.
Dwight SchruteSales3 people
Darryl PhilbinWarehouse1 person
Kelly KapoorCustomer Service1 personThe Two Options Side by Side
The state program is cheaper for you and weaker for your employees. A sponsored plan is the reverse, and the comparison is clearest laid out row by row.
| Dimension | MarylandSaves | Your own 401(k) |
|---|---|---|
| Employer contribution | Not permitted | Optional, except under a safe harbor design, which requires it |
| Cost to the employer | None to participate | Provider fees plus any employer contribution |
| Who pays account fees | The employee | Split between employer and participants by plan design |
| Employer fiduciary duty | None created by participating | Yes, you are the plan sponsor |
| Annual federal filing | None from you | Generally Form 5500 |
| Nondiscrimination testing | None | Yes, unless the plan is safe harbor |
| Employee contribution ceiling | IRA limit, $7,500 for 2026 | Deferral limit, $24,500 for 2026 |
| Account type | Roth IRA, post-tax | Pre-tax or Roth, by plan design |
| Federal startup tax credit | Not applicable | Up to $5,000 a year for three years |
| Setup effort | Registration and a payroll file | Plan document, provider selection, ongoing administration |
Employees do carry a cost inside the state program, and it is small but not zero. Program materials put the standard account at $30 a year plus roughly 18 to 26 cents for every $100 saved after the first year, with a lower first-year figure while some fees are waived.
The statute sets a ceiling as well. Labor and Employment 12-401 caps ongoing annual administrative expenses at 0.5 percent of assets under management.
Set against the rest of what you spend, the two options are not really in the same category. A state auto-IRA is a compliance line with no budget attached, while a plan you sponsor lands in the same conversation as the rest of your benefits cost per employee.
Which Way to Go
For most small Maryland employers with no plan today, registering is the right first move and a 401(k) is the right second one. The two are sequential rather than exclusive.
The federal rules have moved steadily toward making small employer plans easier and cheaper to run, which changes the calculation over time. If you registered for the state program two years ago and never revisited it, the changes in SECURE Act 2.0 are worth a fresh look before you assume a plan is out of reach.
Registering Without Losing a Morning
Registration is a short sequence, and most of the delay comes from hunting for information rather than from the process itself. Gather the pieces first and the rest moves quickly.
Keep the record of that sequence somewhere other than your inbox. The first sheet below is the one-off setup, including the three coverage questions and the dates that prove you acted before the December cutoff. The second is the part that never ends: who was added when, when their decision window closes, what rate they chose, and when they left. Roster drift is the mistake in the next section, and this is what prevents it.
| A | B | C | D | E | |
|---|---|---|---|---|---|
| 1 | Step | Answer or reference | Date completed | Owner | Notes |
| 2 | Do you pay people through a payroll system or service? | Yes / No | |||
| 3 | Have you been in business throughout this calendar year and the one before it? | Yes / No | |||
| 4 | Do you offer, or did you offer in the last two calendar years, a qualifying savings arrangement? | Yes / No | |||
| 5 | Conclusion: covered employer, or exempt | ||||
| 6 | Exemption certified online, or fee waiver claimed as a plan sponsor | Exempt employers only | |||
| 7 | Access code located | ||||
| 8 | Federal Employer Identification Number to hand | ||||
| 9 | Employer account created | ||||
| 10 | Bank and funding details completed | ||||
| 11 | Payroll administrator invited as an authorized representative | ||||
| 12 | Employee roster uploaded | ||||
| 13 | Employee decision window closes | Thirty days after each person is added | |||
| 14 | First payroll deduction runs | ||||
| 15 | First contribution remitted with the supporting file | ||||
| 16 | Status reconfirmed before the December cutoff | Repeats every year |
Where Employers Get Tripped Up
Five patterns come up repeatedly, and the first is the most expensive over time.
Assuming a small payroll is too small to be covered is first. Maryland put no headcount trigger in the definition at all, so the question is whether you run payroll and how long you have been in business, not how many people are on the roster.
Treating the absence of a fine as an exemption is second. The consequence is losing an annual fee waiver, which is small in any single year and becomes a habit of ignoring a state mandate that a future legislature may sharpen.
Forgetting the annual certification is third. A business that already sponsors a qualifying plan skips registration, but its fee waiver is not automatic: the plan has to be certified on the program's claim form by December 31 every year, or the filing fee is due anyway. Certifying an exemption for no employees or manual payroll earns no waiver.
Trying to answer employee investment questions is fourth. The program communicates directly with savers precisely so the employer does not have to, and an owner offering an opinion about a target date fund is stepping toward a role the statute deliberately keeps them out of.
Letting the roster drift is last, and it is the one that quietly creates work. Terminated employees left active, new hires never added, and rate changes never applied all turn a light monthly task into a reconciliation exercise nobody has time for.
Nick Anisimov, FirstHR founder
Frequently Asked Questions
What is the Maryland retirement mandate?
It is a Maryland law that expects most private employers who sponsor no retirement plan to sign their people up for MarylandSaves, a state-run IRA funded by payroll deductions. Title 12 of the Maryland Labor and Employment Article tells covered employers to set up the payroll deposit arrangement and to sign up covered employees by default, leaving each person free to opt out. Your part is to run the deduction and pass the money along. You put in no money of your own, pick no investments, and carry no fiduciary duty by taking part. Whether you are covered depends on three tests, not on headcount: you pay staff through an automated payroll system, you have been operating across the current and previous calendar years, and you have offered no qualifying savings arrangement now or in the past two calendar years. Government bodies fall outside the definition altogether. A state board oversees the program, and a third-party administrator handles daily operations.
What is the employee headcount threshold for MarylandSaves?
There is not one. The statute's definition of a covered employer includes no employee-count minimum at all, unlike the states that switch their mandate on at a fixed headcount. Three questions decide coverage instead: do you pay people through an automated payroll system, have you operated without a break through the current calendar year and the one before it, and do you already offer a qualifying savings arrangement, or did you offer one at any point in the previous two calendar years? The program describes the practical floor this way: you must register if you have at least one employee over the age of 18, use an automated payroll system, and have operated for at least two calendar years. So a very small payroll can be covered, while a much larger business that already sponsors a plan is not.
What is the penalty for not registering for MarylandSaves?
There is no fine. Maryland relies on an incentive rather than enforcement: the state waives its annual report filing fee for entities that comply with the program or offer a qualifying plan of their own, and a covered employer that is not in compliance loses that waiver. The $300 fee generally applies to corporations, limited liability companies, limited partnerships, and business trusts, so noncompliance means paying it every year. The cost is real but modest and recurring. It is still worth handling rather than dismissing. The Department of Legislative Services found that Maryland is the only mandatory state auto-IRA program without penalties, and it has recommended that lawmakers consider adding them if employer participation falls significantly below other states' rates. An employer that has ignored the mandate for years would be in a poor position if that changed.
How much is deducted from an employee's paycheck?
The standard rate is 5 percent of gross pay, taken each pay period after other legally required payroll deductions. Unless the employee chooses otherwise, that rate rises by 1 percent every January once they have been enrolled for six months or more, and it keeps rising until it hits 10 percent. Employees can pick any rate from 1 percent up, within federal IRA limits, can turn the automatic increase down, and can change their rate whenever they like. Because the account is a Roth IRA, contributions are made after tax and do not reduce taxable wages. The money is also invested in an unusual order: the first $1,000 goes to an emergency savings fund, and only contributions beyond that move on to a target retirement date fund.
Do employers have to contribute to MarylandSaves?
No, and they are not permitted to. The program runs entirely on employee payroll contributions, so there is nothing to match, no nonelective contribution, and no employer funding line of any kind. Participating costs the employer nothing. The saver bears the account fees, and the statute limits the program's recurring yearly administrative costs to 0.5 percent of the assets it manages. That is the structural difference between a state auto-IRA and an employer-sponsored plan: the state program asks for administrative effort and payroll integration, while a 401(k) asks for money and brings obligations the state program deliberately avoids. If you want to put employer money behind retirement savings, sponsoring your own plan is the only route that allows it.
Can employees opt out of the program?
Yes, at any time, and participation is voluntary for the employee throughout. After an employer adds someone to the roster, the program contacts that person directly and gives them thirty days to opt out or customize the account. Opting out inside that window means no payroll deduction is ever taken and the account is not activated. Opting out later means the employer is notified to stop the deduction and any money already deducted can be withdrawn. Employees who opt out can rejoin later, and the statute itself provides for re-enrollment under procedures the program board sets. Nothing about that conversation belongs to you as the employer: the program handles the notice, the deadline, and the paperwork, and simply tells you what to run in payroll.
Is a 401(k) a better option than MarylandSaves?
It depends on whether you want retirement savings to do anything for you beyond compliance. Offering any qualifying arrangement, whether a defined benefit plan, a SIMPLE plan, a Simplified Employee Pension (SEP), or a 401(k), takes you out of the mandate and earns the annual report fee waiver once you certify the plan with the program each year. A 401(k) allows far higher employee deferrals than an IRA, allows employer contributions, and can attract a federal tax credit toward setup costs. It also makes you the plan sponsor, with fiduciary duties, testing, and federal filings that the state program does not create. For most employers with no plan today, the choice is about order rather than either-or: register to close the obligation this year, then revisit the plan question when payroll, margins, and hiring pressure justify the cost.
What does an employer actually have to do each pay period?
Run the deduction and send the money. Once registration is complete and the employee decision window has closed, the recurring work is deducting each participating employee's chosen percentage, remitting the contributions with a supporting file, and keeping the roster accurate as people join, leave, or change their rate. The program handles enrollment communication, investment selection, account changes, and distributions. Most small employers find the ongoing effort closer to a payroll task than to benefits administration. The only recurring calendar item beyond payroll is the yearly December 31 check: an employer that has registered and is sending contributions, or a plan sponsor that has claimed the waiver, keeps the following year's filing fee waived.
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