A 2024 report from Clever revealed that 66% of American retirees believe the country is in a retirement crisis. Forty percent of respondents also worry they’ll outlive their retirement savings, while another 19% say they already have.
Because of this nationwide emergency, many states have taken it upon themselves to implement a retirement savings program requirement for employers that meet certain criteria. These programs enable employees, particularly those who wouldn’t otherwise have access to a retirement plan, to set aside money for their golden years.
Maine was one of the first states to implement a state-mandated retirement savings program. Keep reading to learn more about whether the Pine Tree State’s program is a good fit for your business.
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What is MERIT?
In 2021, the state of Maine implemented the Maine Retirement Savings Program, which requires covered employers to enroll in the state’s retirement savings program or a qualified alternative. Enrolling in the state-mandated retirement plan, which is known as the Maine Retirement Investment Trust or MERIT, allows eligible employees to contribute to a Roth individual retirement account (IRA) with Vestwell.
The Maine Retirement Savings Program started as a pilot program in 2023 and opened enrollment to employers with more than five employees. Registration for the full-fledged program began in January 2024.
How does the MERIT program work?
Maine employees who enroll in a Roth IRA through the Maine Retirement Savings Program contribute to their retirement plan via payroll deduction.
Roth IRAs are funded with after-tax employee contributions, so employees don’t pay income tax on any money withdrawn during retirement. However, any non-qualified withdrawals made before an employee reaches the age of 59½ are charged a 10% penalty on the earnings.
MERIT Roth IRAs are portable, meaning employees can take their retirement plan savings from job to job without penalty. Since the account belongs to the employee instead of the employer, they don’t have to roll over their funds every time they leave a company.
Eligibility requirements and enrollment for employees
To be eligible for the MERIT program, employees must meet the following requirements:
- Be age 18 or older
- Have a valid Social Security number
- Earns taxable wages from a Maine employer
- Be employed for at least 120 days
Part-time, seasonal, and temporary employees who meet the above requirements are also eligible to participate in the MERIT program.
If an employer enrolls in MERIT, workers who meet the above requirements will be notified of their eligibility and prompted to create an account through the MERIT online portal. Employees will then have 30 days to customize their retirement savings options or opt out of the program.
The Maine Retirement Savings Program also allows independent contractors and self-employed individuals in the state to enroll in the plan, as long as they are at least 18 years old and have earned income in Maine. If you fall into this category, you’ll need to open your own account since you’re your own employer. Once you enroll in MERIT, you can set up and begin contributing to your Roth IRA.
Contribution options for employees
The default employee contribution rate for the MERIT Roth IRA is 5% of a plan participant’s salary or wages. If employees don’t change the default rate through their MERIT account, their contribution rate will increase by no more than 1% every January (up to a maximum of 10%).
However, employees can contribute as little as 1% or as much as 100% of their paycheck, as long as they stay under the annual IRA contribution limits set by the IRS. Participating employees should keep track of their contributions and ensure they stay under the annual limit, particularly if they own multiple IRA accounts.
If they’re unsure how much to deduct from each paycheck, employees can use the MERIT Retirement Calculator to determine the savings rate that best fits their budget and retirement goals.
Investment options
All MERIT participants are automatically enrolled in the Capital Preservation Fund for 30 days unless they choose otherwise. After 30 days, the funds will be transferred to a default Target Retirement Date option based on the expected year of their retirement at age 65.
Other fund options employees can invest in include the Bond Index Fund, International Equity Fund, and US Equity Fund.
Although MERIT doesn’t provide investment advice, the program does offer online tools and support to help employees understand their investment options and make informed decisions about their money.
Plan fees for participants
Employees who enroll in the MERIT program pay two fees every year:
- An asset-based fee of approximately $0.32 for every $100 of plan assets
- A $22 annual administrative fee that is charged quarterly at $5.50 a quarter
How employees can opt out of the program
Once eligible employees receive a notification from MERIT, they have 30 days to customize their account or opt out of the program.
Employees who want to opt out can do so online through the MERIT online portal, by calling (833) 608-8840, or by mailing the IRA Account Maintenance Form to the following address:
MERIT
PO Box 534495
Pittsburgh, PA 15253-4495
Employees who want to re-enroll in the program can do so at any time through their MERIT account.
What employers need to know about the MERIT program
Eligibility requirements and registration deadlines for employers
Maine businesses must enroll in the Maine Retirement Savings Program if they meet the following criteria:
- Have been in business for at least two years
- Have five or more employees
- Don’t offer a qualified retirement plan
Covered employers with workers in multiple states should only register with MERIT employees with Maine taxable income. Employers with fewer than five employees can also enroll in the MERIT program if they want—they will just follow the same steps other employers take to register their business (more on this later).
Employers that meet the eligibility criteria above in 2025 must register their business with the Maine Retirement Savings Program by June 30, 2025. In the future, employers that meet these requirements must enroll in MERIT or another qualified retirement savings plan by December 31st of the year they become eligible for the program.
But what if you don’t want to enroll in the MERIT program? In that case, you must enroll in an alternative qualified retirement program, such as a 401(k) or SIMPLE IRA, before the deadline and offer this benefit to your workforce. Keep in mind that, if you go this route, you’ll still need to register your business with the state and certify your exemption from this requirement.
Employer responsibilities under MERIT
All eligible employers must register with the Maine Retirement Savings Program by their appointed deadline, whether they plan to enroll in the program or not. If they have enrolled in a qualified retirement plan (or plan to by the deadline), they must certify their exemption through the MERIT online portal.
MERIT is simple and free for employers to administer. Under the program, a participating employer’s primary responsibility is to submit payroll contributions for employees who stay in the program and maintain employee records. To remain compliant, employers must send payroll deductions no later than 14 days after the payroll period in which the wages were earned.
Employers will also need to notify MERIT and participating workers about any changes in the status of their retirement plans.
On the flip side, employers participating in the MERIT program are not responsible for the following:
- Educating employees about their rights and obligations under MERIT
- Offer investment advice to employees
- Enrolling employees in a MERIT Roth IRA
- Managing employees’ investment options
- Processing employee changes to their investments
- Processing distributions from employees’ Roth IRAs
Because the retirement accounts offered through MERIT are Roth IRAs, businesses can’t make employer matching or profit-sharing contributions.
For additional information on the Maine Retirement Savings Program and its requirements, visit the website’s program details page.
Non-compliance penalties
Employers who meet the MERIT eligibility requirements and fail to enroll will be subject to fines starting on July 1, 2025. These penalties include:
- $20 per covered employee from July 1, 2025, to July 30, 2026
- $50 per covered employee from July 1, 2026, to July 30, 2027
- $100 per covered employee on or after July 1, 2027
How to register your business for the MERIT program
If you qualify for the Maine Retirement Savings Program, you’ll receive a notification by mail and email when it’s time to register. Then, you’ll set up an account on the MERIT website using the following information to register your business:
- Your Employer Identification Number (EIN)
- The access code included in your MERIT notice
If you want to enroll before you receive a registration notice, you can request an access code by filling out the New Company Request form online.
Once you’ve registered your business, you’ll need to complete the onboarding process. You’ll be expected to provide the following information:
- Legal name and/or DBA for your business
- Business address and phone number
- Payroll information, including your current payroll provider
- Current pay schedule
- Company banking information to send employee contributions from
- Employee information (first and last name, date of birth, Social Security number, physical address, and email address)
If you receive a registration notice from MERIT but already have a qualified retirement plan (or plan to enroll in one by the deadline), you must certify your exemption through the MERIT portal instead.
Once you certify your business, you’ll receive an exemption certification. The certification will remain in effect for as long as you continue to offer a qualified retirement plan to your workforce or have fewer than five covered employees. However, if you have five or more covered employees and receive an exemption because your business is newly established, it will expire once you’ve been in business for over two calendar years.
Benefits of the MERIT program
Businesses of all sizes can now offer retirement options to employees
Some small business owners choose not to offer employer-sponsored retirement plans to employees because they lack the bandwidth or the budget to do so. The Maine Retirement Savings Program helps reduce this burden on employers by taking on a portion of the administrative work and ensuring that companies don’t need to pay any fees to offer these plans to their workers.
Because MERIT is free for employers, easy to enroll in, and requires minimal administrative upkeep, even companies with lean HR teams and tight budgets can offer this to their workforce.
And since the MERIT program enables more companies to offer retirement plans to their employees, this may help their recruitment efforts since these benefits are highly sought after by job seekers.
MERIT makes saving for retirement easy and accessible
With the Maine Retirement Savings Program in place, more employees have access to a Roth IRA that can help them save for life after retirement. They can also take this retirement plan with them if they leave to work at another company.
Additionally, auto-enrollment means that employees don’t need to take any action to save for retirement. The retirement account is automatically funded with payroll deductions if the plan is left untouched, while payroll deductions and contribution rate increases happen on autopilot as well.
Plan participants can easily adjust their contribution rates, opt out, or re-enroll in the program by logging onto their MERIT account.
Do businesses have to use MERIT?
The requirements set out by the MERIT mandate only apply to Maine employers that don’t already offer a retirement plan to their employees. So, if you’ve already enrolled in a retirement plan, you don’t have to enroll in the MERIT program.
If you haven’t enrolled in a plan but are considering alternatives to the MERIT Roth IRA, some options to look into include:
- 401(k) or other 401(a) plan
- 403(a)
- 403(b)
- 408(k)
- 408(p)
- 457(b)
Streamline your employee benefits with Gusto
Many popular payroll platforms, including Gusto, are fully integrated with the Maine Retirement Savings Program so they can help their customers manage their administrative responsibilities.
However, there may be instances where enrolling in a different retirement plan would benefit your employees and your company more.
Consider, for example, a 401(k) plan administered by Gusto. A 2022 Gusto report found that investing in a 401(k) plan can help small and medium-sized businesses save more than $100,000 annually by reducing turnover and recruitment costs. Other worthwhile benefits of this option include:
- Reduced cost with employer matching contributions and tax credits: Many 401(k) plans allow employers to contribute to employee retirement accounts, which can then be written off as a business expense on the company’s tax returns. Eligible businesses may also be able to claim up to $16,500 in tax credits for the first three years of their retirement plan.
- Flexible and affordable plan options: A growing list of 401(k) partners gives you plenty of options within your budget to choose from.
- Integration with Gusto to make plan management easier: Gusto connects with your plan of choice for automatic payroll deductions. Employees also have their own Gusto account, which gives them access to their 401(k) accounts, contribution details, pay stubs, and W-2s.
- Higher contribution limits for employees: 401(k) plans have higher annual contribution limits than Roth IRAs, so employees can save more money for retirement with an employer-sponsored 401(k) plan.
For details on the differences between a 401(k) plan and a Roth IRA from MERIT, review this comparison table:
| Features | 401(k) | MERIT Roth IRA |
| Auto-enroll | Available | 5% |
| Auto-escalation | Available | 1% increase every January up to 10% |
| Payroll integration | Available | Available |
| Investment options | A large range of funds that vary based on the provider | 15 funds |
| Employer matching and profit-sharing contributions | Available | No |
| Investment advice | Available | No |
| Taxability | Pre-tax and after-tax contributions are available | Roth after-tax contributions |
| Annual contribution limit | $23,500 for employees ($31,000 for those aged 50-59 and $34,750 for those aged 60-63), plus optional employer contributions | $7,000 for employees ($8,000 for those 50 and older) |
| Participant fees | Varies, but often ranges between 0.5% and 2% of the plan balance annually | $0.32 for every $100 of plan assets and a $5.50 quarterly administrative fee |
If you already have a Gusto account, you can learn more about our 401(k) partners on our website. Employers who decide to enroll in a plan through our platform can contact our customer support team for assistance during the setup and management process.
For more information on how Gusto can help you manage your employee benefits, payroll, hiring, and more, request a demo of our software today.
