Maryland Retirement Mandate: MarylandSaves for Employers

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, and the mechanics rhyme across most of them. If you employ people in more than one state, the broader picture of state retirement program requirements is worth reading alongside this, and the wider set of Maryland employer duties sits in the Maryland compliance hub.

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, anyone under the age of 18 before the calendar year begins, employees covered by a collective bargaining agreement providing 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 exempt employer, before that date is what secures the state filing fee waiver for the following year.

This is worth contrasting with the staged, one-off compliance dates that several other states have used, 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, which makes it one of the mildest state auto-IRA regimes on this specific point.

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, the rules can be tightened by a legislature that already built the machinery, and 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 still earns the filing fee waiver. The statute defines a qualifying employer-offered savings arrangement broadly: an IRA, a defined benefit plan, a 401(k), a Simplified Employee Pension, a SIMPLE plan, or another compliant arrangement the board specifies.

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. The mechanics of getting one running are covered in more depth in the guides to a startup 401(k) and to a safe harbor design.

The 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.

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, and the statute 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 tracked 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.

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 to certify an exemption is third. Employers who genuinely fall outside the mandate still need to tell the state, either by certifying the exemption or by claiming the waiver as a plan sponsor, or they pay the filing fee anyway.

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.

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