so under a new Maryland law that went into effect on September 15 2022 MarylandSaves will require
eligible employers to establish a retirement savings plan for their employees do you own a
business are you in the state of Maryland that in most cases you must comply according to Maryland
saves roughly 1 million people in Maryland are working full-time but their employers
don't offer a savings plan that is about to change I'm Colin Exelby I'm a Certified inancial Planner
professional with over 20 years of experience providing financial planning for business
owners and their families that just makes sense I own the financial advisory practice Celestial
Wealth Management and provide advice virtually to clients all over the country now Maryland's
program officially opened to the public September 15th Maryland is now the 14th state that has
created legislation and becomes the sixth active implementation along with California Illinois
Massachusetts Oregon and Washington and this is just the beginning I could easily really see Most
states adopting something similar in coming years so what does it mean for you if you own a business
in the state of Maryland I am going to explain what you need to know now this is a good spot
for me to point out important disclosures the information in this video it's for educational
purposes this is not specific financial planning or investment advice it's important that you
consult with your Tax Advisor before implementing any investment or financial planning process
all right if you have a for-profit or a non-profit business operating in the state of Maryland and
you have been in business for at least two years you have at least one W-2 employee
you pay employees through a payroll system like ADP paychecks or my personal favorite Gusto you
haven't provided a retirement savings plan in the last two years and the key part you don't
currently offer your employees a retirement plan if this is you then you must register for the new
Maryland saves plan or set up an alternative plan for your employees by December 31st 2022. that
doesn't give you much time gosh another thing small business owners must worry about in the
fourth quarter not only inflation a potential recession a business slowdown but now this
retirement plan we well what if you already have a retirement plan set up for your business do you
just ignore this well it's good news if you do have a current retirement plan you are able to
opt out of the Maryland saves plan but in order to opt out you still must go through the process
effectively telling the state that you have a plan in place that's actually an easy process
and puts you in compliance so you avoid fines from the state to opt out you go to the Maryland saves
website enter some basic company information as well as an access code that the program is
sending to eligible businesses then you simply register as exempt here's a little incentive
as long as you register or opt out because you have an existing plan you will receive a waiver
of the 300 annual business filing fee in Maryland the only businesses that will not get the waiver
are those that ignore this so it's an easy way to make 300 bucks a year okay now before you go
off on the rails if you don't have a retirement plan set up I am here to tell you it's not that
bad in my opinion this is actually a good thing for many people we need deadlines to make things
happen I know I do many small business owners talk about putting a retirement plan in place
for employees and for themselves but for one reason or another life gets in the way and
it gets delayed well now is the chance to address this because you are now required to do something
so what is the Maryland saves plan the Maryland saves plan is a new automatic workplace retirement
and emergency savings program called work life accounts Maryland is the first state to include
retirement savings and emergency Savings in one account under the law employers with automatic
payroll systems are required hired to establish a payroll deduction arrangement for employees
through the state-run trust this plan is set up as a Roth IRA account for individual employees what's
a Roth IRA a Roth IRA is a retirement account where employees do not receive a deduction for
contributing but the growth over time is not taxed nor are distributions as long as it is
used for retirement and a few rules are followed in addition you have access to any contributions
if you need them for an emergency or whatever else without penalty or tax that can be a huge
Advantage the younger you are which is why this plan is being implemented it's important to note
however that Roth contribution rules do include this plan so if you are maxing out your other Ira
contributions you may not be able to contribute if your household income is too high you may not be
able to contribute either the annual maximum contribution in 2022 is six thousand dollars
for those under fifty and seven thousand dollars for those 50 and older what do employers need to
do this was designed believe it or not to be very hands-off for the employer unlike other retirement
plans there are no fiduciary or required employee matching obligations there are no record-keeping
or advisory or administrative fees charged to the employer so essentially no cost to the employer
there are administrative and asset management fees that are assessed to participants however
so employees should be aware that the plan isn't free to them but it's still priced attractively
as the employer if you don't have an existing plan in place head over to the Maryland saves
website register for the plan and add employee data including payroll information if you have
a small company you can add the data manually and if you have a large number of employees
you can upload employee data in a batch once the employer adds an employee to the plan they
will receive a welcome email and then have 30 days to opt out if they don't the employee is
automatically enrolled in the plan as long as they are over age 18. each employee by default
has an initial five percent deferral from their employee pay set up with automatic one percent
increases up to a maximum of 10 percent that's not to exceed the IRS contribution limit for the year
the point here is that studies show a large number of employees will not change the auto
enrollment and so we'll begin accumulating savings automatically the employee does have
the ability to change the deferral up or down or eliminate it completely but they will have
to manually do it on their own not the employer the employee also chooses the investment options
and can withdraw the funds if they choose alright say the account is set up where
does the money go when it gets contributed when payroll deferrals are made funds are placed into
an emergency savings account until the balance reaches one thousand dollars it is one hundred
percent invested into a guaranteed investment contract issued by Lincoln National Life
after the emergency savings account is funded all one thousand dollars contributions will be
then invested into an age-appropriate Target date fund or other options that can be chosen by the
employee so in this plan with minimal effort from the employer as well as the employee the
employee can start accumulating a savings account for emergencies as well as a retirement account
sounds like a good thing okay now that you know the details and the limitations of this plan what
if this is the little nudge that you need to look into setting up your own company plan there are a
number of great options out there that can be implemented in cost-effective ways to save a
retirement and get some great tax incentives a custom plan may allow for both traditional and
Roth contribution options the contribution limits may be much higher you may want to
offer a matching component as a way to give employ employees a bonus or attract Talent you may want
to share profit sharing with your employees you may want a more robust Suite of investment options
there are a lot of choices but go slow design a plan that works for you and don't rush into
anything the only deadline is that something must be done by December 31st of this year for most
companies without a plan the Maryland saves option may be the best choice for now while you decide if
you want to implement something else look I work with business owners around the country every day
on the best ways to structure retirement plan to maximize the benefits of both the employer and
the employee if you would like to discuss your situation further and what retirement plan may
make the best sense for your business feel free to reach out to me on my website at celestialwm.com
just hit that contact button and send me a message what about employers in other states outside of
Maryland as these mandates continue to roll out over the next couple of years it's important for
small businesses to keep an eye on deadlines rules and regulations to avoid penalties and if you do
run a business make sure you check out these videos next to supercharge your financial future