Maine State Capitol Building

Maine’s Retirement Plan Mandate – Final Rules & Program Details

NATE MOODY, CPFA®, RETIREMENT ADVISOR, Partner
October 2023

What is it?

To address the growing retirement savings crisis, especially amongst those individuals without access to a retirement plan through their employer, Maine has joined fourteen other states to pass a mandated Auto-IRA retirement savings program.1

“An Act To Promote Individual Savings Accounts through a Public-Private Partnership” requires that covered employers with 5 or more covered employees automatically enroll their employees in the Maine Retirement Investment Trust (MERIT) at 5% of their pay.2

When does it take effect?

Maine businesses will be receiving a communication in January 2024 requiring that they register with MERIT.  Those who are exempt because they have their own retirement plan or are below the employee threshold will be required to register online and certify that they are exempt. 

Businesses with 15 or more covered employees will need to register by April 30th, 2024 and businesses with 5 or more covered employees will need to register by June 30th, 2024. 

The final deadline for organizations to comply will be December 31st, 2024 with fines starting in 2025.

Who is a ‘Covered Employer’ and ‘Covered Employee?’

Covered employers are defined as any Maine-based organization (for-profit and not-for-profit) with 5 or more ‘covered employees.’  Governmental organizations, organizations created in the last two years, or organizations that offer their own qualifying retirement plan are exempt from MERIT.  The law even applies to cannabis-related businesses.

Covered employee is defined as anyone 18 years of age or older who is employed by a covered employer and who has taxable wages in Maine. This includes part-time employees and seasonal employees who work more than 120 days.

What if my organization already offers a retirement plan?

If your organization already offers a qualifying employer-sponsored retirement plan then you are exempt from the ‘covered employer’ definition and thus exempt from the MERIT program.  However, you will still need to register with the State to attest that you have a plan in place.

Qualifying employer-sponsored retirement plans include 401(a), 401(k), 403(b), 457(b), SIMPLE IRA, and SEP IRA.

What if my organization offers a plan but not everyone is eligible for it?

As long as you have a qualifying employer-sponsored plan and you define eligibility within what is allowable for that particular plan, then your entire organization is exempted from the program. 

However, your employees (eligible for your plan or not) may still voluntarily elect to sign-up for MERIT.  You will be responsible for remitting their payroll deductions to the program.

What if my organization does not offer a retirement plan?

You have three options:

  1. You can start your own retirement program prior to the deadline.
    • Reach out to Lebel & Harriman to learn more.
  2. You can use Maine’s program (MERIT).
    • Using the Maine Retirement Investment Trust program means automatically enrolling your employees into the program.
  3. You can do nothing and fall out of compliance.
    • Employers that fail to enroll in MERIT without reasonable cause will be subject to penalties assessed annually, ranging from $10-$100 per covered employee, increasing every year.

Maine Retirement Investment Trust (MERIT) – Program Details

What is it?

MERIT is a payroll-deduction Roth Individual Retirement Account (IRA) program. This is not an employer-sponsored plan.  As such, not only are you not required to provide a match, but as an employer, you cannot contribute to this program. 

Your role as employer is limited to enrolling employees into the program and remitting their deductions.  Employers must actually remit contributions in order to be considered compliant.

Plan Design

Employees will be automatically enrolled at 5% of their pay and then automatically increased 1% annually up to 10%.  Employees always have the option to opt out at any point. 

Contribution limits are the same as Individual Retirement Accounts and employees will be responsible for recordkeeping the income limits that IRAs are subject to.

Platform, Investments, and Fees

Maine recently announced a partnership with Colorado to join their existing state-run Auto-IRA program.  The program is administered by Vestwell.

There are currently four investment options: Target Date Fund, Capital Preservation Fund, Bond Index Fund, and International Equity Fund.

The anticipated fees per account holder are $22/year + 0.20% asset-based fee + investment fees. (0.025% – 0.12%).  There are no fees to employers.

What are the benefits of starting your own plan?

Offering a retirement plan can provide several benefits for a company, including attracting and retaining talented employees, improving employee morale and loyalty, and potentially reducing turnover and recruitment costs. 77% of workers report that retirement benefits are a major factor in their decision to stay with their current employer.3

Additionally, offering a retirement plan provides tax benefits for the company. Organizations can deduct contributions to a retirement plan as a business expense.  The IRS also provides significant tax credits for small businesses that establish a retirement plan, which can offset up to 100% of the cost of setting up and administering the plan. As of this year, there are also new tax credits that can offset up to 100% of any employer contributions you might make.4

How can Lebel & Harriman help?

Lebel & Harriman Retirement Advisors is an independent advisory firm based in Falmouth, Maine and has been specializing in Retirement Plan Consulting since 1978.  L&H has a deep level of expertise in helping employers design and implement retirement plans. 

If you have questions about how this new legislation could affect your business or would like information about implementing an alternative qualified retirement plan that better aligns with your business and employees’ needs, please do not hesitate to reach out to your local experts.

For more information, contact Nate Moody, CPFA at (207) 773-5390 or nmoody@lebelharriman.com.

Sources

  1. https://legislature.maine.gov/legis/bills/getPDF.asp?paper=SP0451&item=1&snum=131
  2. https://meritsaves.org/wp-content/uploads/2023/06/PL-2023-c.-167-LD-1082-ME-Savings-Retirement-Board.pdf
  3. https://www.ebri.org/docs/default-source/rcs/2020-rcs/2020-rcs-summary-report.pdf
  4. https://www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

This document is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. 

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