When the thought of retirement feels far away, and may even be decades away, it can be easy to think that saving for it is something that can begin another day. But the longer it’s put off, the less there will be for when retirement begins—not to mention, the longer it’s put off may mean that it’s forever put off. According to the Federal Reserve, 28% of American adults who aren’t retired actually have no retirement savings at all.
When employers offer a retirement program to employees, access increases. But in Maryland, an AARP study found that 43% of private sector employees between the ages of 18 to 64 had employers that didn’t offer one, as is often the case with small businesses. That was before MarylandSaves was enacted and took effect in September 2022. As of the end of June 2024, there were more than 3,800 businesses enrolled in it—with nearly 1,200 of them actively submitting payroll deductions.
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What is the MarylandSaves program?
When a business doesn’t already provide a qualified retirement plan but has an automated payroll system, and has been around for at least two years with at least one employee over age 18, then it must offer the MarylandSaves Program.
Companies that meet the criteria need to annually register for this state-mandated retirement program. Under Maryland law, it’s sponsored by the Maryland Small Business Retirement Savings Program (“MSBRSP” or “the Board”), which includes the Maryland State Treasurer and Maryland’s Secretary of the Department of Labor. The Board has a fiduciary duty or legal responsibility to act in the best interest of your employers, who are the savers. Employers do not have this obligation and have no say or hand in the investment options or their employees’ choices regarding them. They solely facilitate the retirement savings plan, and the program administrator is Vestwell State Savings, LLC.
A Maryland business will need its employer identification number (EIN) and State Department of Assessments and Taxation (SDAT) number when registering for MarylandSaves. If you already provide your employees with another retirement plan, then you need to claim your annual report fee waiver by December 31.
How does the MarylandSaves program work?
MarylandSaves paycheck contributions are after-tax money that goes into a WorkLife Account, which is a Roth individual retirement account (aka Roth IRA). With these types of accounts, any distributions taken after age 59½ aren’t taxed, including the interest earned on the money that has been in the account since beginning to add contributions to it.
Some of the funds in this WorkLife account can also be accessed when life takes an unexpected turn and becomes financially tight. The first $1,000 of an employee’s MarylandSaves WorkLife contributions will be invested in an Emergency Savings Fund. This emergency savings account allows employees to withdraw up to $1,000 of their contributions from it in emergency cases.
However, if any funds beyond those in the emergency savings account are withdrawn before age 59½ and not rolled over onto another eligible IRA or to an eligible retirement account, then there is a 10% IRS tax penalty on the earnings.
Eligibility requirements for employees
MarylandSaves has a simple set of requirements for employee participation:
- They need to be W-2 employees, who are at least 18, which is the state’s age of majority.
- They need to pay Maryland income taxes, whether they’re full-time or part-time for a Maryland employer (or are self-employed and have earned income). An employee can live in another state to participate, as long as their employment is based in Maryland.
- They must be eligible for a Roth IRA. For example, if someone’s modified adjusted gross income (MAGI) in 2025 is at least $150,000 when they’re single tax filers or at least $236,000 when they’re filing joint taxes, then they may only be able to contribute a limited amount to a Roth IRA or won’t be able to contribute anything at all.
Enrollment and contribution options for employees
Once an employer adds employees to the MarylandSaves portal, they’ll be informed and will have 30 days to either opt-out or make changes based on available options. After this period of time, contributions are automatically deposited into a Roth IRA and calculated as 5% of gross pay, though they’re taken from net pay, so they are removed from the employee’s paycheck after taxes. The program includes auto escalation with an annual increase of 1% until 10% is reached.
This MarylandSaves example illustrates how a $500 per month contribution could potentially grow with a 5% hypothetical annual rate of return over 40 years:
| Monthly contribution | 5 years | 10 years | 20 years | 40 years |
| $500 | $34,786.40 | $78,788.15 | $207,729.47 | $769,868.50 |
| $250 | $17,714.04 | $39,805.83 | $104,542.90 | $386,773.85 |
| $100 | $7,470.62 | $16,416.43 | $42,630.95 | $156,917.07 |
| $50 | $4,056.15 | $8,619.97 | $21,993.64 | $80,298.14 |
Employees can decide not to use the MarylandSaves WorkLife Account (which is the Roth IRA), or choose to increase or decrease their savings rate by 1% (as well as adjust the auto escalation rate), and can contribute anywhere from 1% to 100% of their gross pay, based on the Roth IRA limits.
When the savings rate is adjusted, remember that the maximum contribution limit for the year can’t be exceeded for the total amount of IRAs that an employee has, whether that’s just through MarylandSaves or if they have others, too. That amount is the same for 2025 as it was for 2024: $7,000 for those who are age 49 and younger and $8,000 for those 50 and up, whether single filers or married filing jointly.
Talk with a tax or financial advisor when you have an existing pre-tax retirement account to roll over. Before making changes or taking any distributions, discuss that it could be considered as taxable income, when that rollover changes from a pre-tax to post-tax status to be added to a Roth IRA.
There are some fees for employees (not employers) to participate in the MarylandSaves WorkLife Savings Account. There is a $30 annual account fee per year ($7.50 is charged quarterly for it, and automatically taken from your account balance), plus depending on how much is in emergency savings (i.e., which is up to your first $1,000 in savings) or in other options, you’ll pay $0.18 to $0.85 per $100. It’s only less the first year, which is $22.50 and $0.18 for each $100 you save.
For a $1,000 investment, this is how much it will approximately cost from one to 10 years, excluding what you will pay in state and federal taxes for withdrawals:
| Investment | 1 year | 3 years | 5 years | 10 years |
| Emergency Savings | $18 | $78 | $138 | $288 |
| Target Retirement | $19 | $81 | $143 | $298 |
| Bond Index | $18 | $79 | $139 | $291 |
| Global Growth Stock | $25 | $101 | $173 | $361 |
Understanding the investment options
Employees can entirely opt out of the program, but if they want to participate and aren’t sure which investment option is right for their needs, they can take the thinking out of the process and actually do nothing to begin saving. Once enrolled in MarylandSaves, they will automatically receive the standard investment option, which includes:
- Emergency Savings Fund (up to first $1,000 in contributions)
- Target Retirement Date Option (contributions automatically go into this fund after $1,000 has been reached in the emergency fund)
- The automatic investments factor in the date of birth and the anticipated year of retirement
But if employees want to choose their investments, they have several choices:
- Target Retirement Date Options
- Bond Index Option
- Global Growth Stock Option
The bond choice is more conservative, while the stock option has the potential of above-average returns with higher risks because it invests in blue chip company stocks in at least five different countries, including the US. The latter is designed more for those who don’t need access to their money for 10 years or more.
The Target Retirement Date Options are called that because each option has an actual “target date” (e.g., 2035, 2045, 2055). They’re available for savers of all ages, and each includes a mix of stocks and bond funds, depending on whether savers want to take more risk or be more conservative with the investment mix, according to what the target date for retirement is for the year closest to when someone turns 65, whether that’s 2030 or 2070.
The reason they’re packaged this way is because some funds have been created to drive growth for younger investors who can take more risk and others become more conservative over time to help investors preserve savings as the funds near their target dates.
Here is the full range of investment choices with MarylandSaves:
| Investment option | Invested in | Underlying investment fee | Program administration fee | Total annualized asset-based fee |
| Emergency Savings Fund | Guaranteed Investment Contract issued by The Lincoln National Life Insurance Company | 0.00% | 0.18% | 0.18% |
| Target Retirement Date Option | BlackRock LifePath Index Retirement K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2030 Option | BlackRock LifePath Index 2030 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2035 Option | BlackRock LifePath Index 2035 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2040 Option | BlackRock LifePath Index 2040 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2045 Option | BlackRock LifePath Index 2045 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2050 Option | BlackRock LifePath Index 2050 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2055 Option | BlackRock LifePath Index 2055 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2060 Option | BlackRock LifePath Index 2060 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2065 Option | BlackRock LifePath Index 2065 K | 0.09% | 0.18% | 0.27% |
| Target Retirement 2070 Option | BlackRock LifePath Index 2065 K | 0.09% | 0.18% | 0.27% |
| Bond Index Option | State Street Aggregate Bond Index Fund Class K | 0.025% | 0.18% | 0.205% |
| Global Growth Stock Option | T Rowe Price Global Growth Stock Fund – I Class | 0.68% | 0.18% | 0.86% |
What employers need to know about the MarylandSaves program
Eligibility requirements and deadlines for employers
MarylandSaves has a simple set of requirements for eligible employers:
- At least two calendar years of operation
- Registered to conduct business in Maryland
- No less than one W-2 employee who is at least 18, which is the state’s age of majority
- An automated payroll system is being used
- A separate, qualified retirement savings program isn’t provided, such as:
- 401(k) plan or other 401(a) plan
- 403(a), as in a qualified annuity plan
- 403(b) plan
- Simplified Employee Pension (SEP) plan
- Savings Incentive Match Plan for Employees (SIMPLE) plan
- 457(b) Governmental deferred compensation plan
If you’re not participating in the MarylandSaves program and provide a qualified retirement plan, your company could be eligible for the 2026 Maryland State Department of Assessments & Taxation (SDAT) $300 Annual Report Filing Fee Waiver, as long as you complete and submit this form by December 31, 2025.
Employer responsibilities under the MarylandSaves program
Employers aren’t responsible for the decisions and their outcomes that are made in connection with the MarylandSaves program. However, there are some dos and don’ts that employers must follow when facilitating it:
| Do | Don’t |
| Look for your registration notice and create an employer account (guidance on how to do this is below) | Provide tax, legal, investment, or financial advice—or manage employees’ personal information, including beneficiary details |
| Add your payroll information and connect your company bank account | Promise a return on savings or any type of additional benefit |
| Add employee details, including full legal name, Social Security number, date of birth, contact info, etc. | Tell employees whether or not they should contribute to the program or whether they are eligible for a Roth IRA |
| Update your participating employees’ deferral savings rates within your payroll system once the 30-day period to opt out after enrollment has passed, and submit their contributions with the next payroll | Share opinions about the program and the IRAs maintained by it |
| Maintain your staff list, employee records, and deferral changes, and keep your employees’ payroll contributions up to date for ongoing pay periods | Contribute money to the program or match employee contributions |
Non-compliance penalties
There are none. Unlike other states with mandatory auto-IRAs that have penalties for businesses that don’t comply, the state of Maryland has no penalties in place for companies that fit the requirements for MarylandSaves yet don’t enroll in it despite the state’s mandate.
How to register your business for the MarylandSaves program
When broken down into a few steps, small business owners will be relieved to hear that registration is easy and fast. This checklist for signing up provides an overview and these key tasks and details:
- Go to the MarylandSaves employer verification page. Enter your EIN and access code to begin (check your mail or email for it, and if you haven’t received it, request one by completing this form). In addition, to set up an employer account, you’ll need your company’s State Department of Assessments and Taxation (SDAT) number and business email.
- Create your own password. Your business email will be your username.
- Share your payroll provider (e.g., Gusto) and payroll schedules.
- Add your company’s bank information—such as the routing number, bank name, bank account number, and account type—to connect it to MarylandSaves.
- Enter employee details, such as:
- Full names
- Social Security numbers
- Permanent US addresses
- Birthdates
- Phone numbers
- Email addresses
Once that’s done, MarylandSaves will send messages to your employees related to opting in or opting out within 30 days:
- If they opt-in, then you’ll start payroll contributions for them. MarylandSaves.com offers webinars for employers to ask questions, as well as recordings of previous ones that can be accessed.
- When they don’t make a selection to opt-out or to adjust how much is taken out of their paychecks toward retirement, they’ll be automatically enrolled in a Roth IRA with the default contribution rate of 5% of gross pay, deducted from paychecks after taxes and other payroll deductions required by law are taken out.
Benefits of the MarylandSaves program
An auto-IRA like MarylandSaves can have a positive impact on retirement savings. Gusto analyzed state auto-IRAs, and the results revealed that there was a 55% increase in retirement savings for median earners and below.
MarylandSaves could potentially help small businesses even the playing field with larger companies when they’re trying to retain employees seeking more benefits for their financial futures. The availability of an auto-IRA when a small company doesn’t offer an employer-sponsored retirement plan can benefit both employers and employees.
In fact, when the employees among the employers on Gusto’s platform receive retirement benefits, then they are, on average, 40% less likely to leave those businesses within their first year of working for them. For employees working in retail, food and beverage, or other personal services, that rate increases to 54%.
Do businesses have to use the MarylandSaves program?
Businesses of at least one employee do not have to enroll in MarylandSaves if it’s already providing a retirement plan that meets the requirements of Internal Revenue Code sections 401(a). Suitable employer-sponsored examples that would be appropriate and satisfy the standards for an exemption include:
- 401(k)
- 403(a)—qualified annuity plan
- 403(b)—tax-sheltered annuity plan
- 408(k)—SEP plan
- 408(p) SIMPLE IRA plan
- 457(b) Governmental deferred compensation plan
For those businesses that must enroll because they meet the eligibility requirements and don’t offer an alternative retirement plan, the MarylandSaves portal is designed to make administering the auto-IRA state program easy for employers. It has a batch upload feature and a payroll system integration. It also allows employers to add others to complete the registration for them. They can invite them through the portal or update the admin access in it. MarylandSaves provides a quick video to describe the simple onboarding process.
Retirement benefits made easy with Gusto
If you’d like, you can add Gusto or your preferred payroll provider to your MarylandSaves retirement program to help you manage your administrative tasks for it. But if you want your employees to have a retirement savings program that offers more benefits and flexibility, consider enrolling in a 401(k) plan.
Colorado and Oregon, which have auto-IRA mandates, have actually seen an increase in 401(k) adoption amongst the smallest employers in those states, including those with at least five employees and those with one to four employees, respectively. Here are some benefits of offering a 401(k):
- Reduced cost with tax credits: Eligible businesses may be able to claim up to $16,500 in tax credits for the first 3 years of their 401(k)—potentially covering 100% of plan costs.
- Flexible and affordable plan options: Gusto’s growing list of 401(k) partners means plenty of plans to choose from at low price points to fit your budget.
- Integrated to make life easier: Gusto payroll syncs with your 401(k) plan to make automatic deductions. Employees manage their own Gusto accounts, with access to their paystubs, W-2s, 401(k) accounts, and contribution details.
- Great benefits help you build a great team: Because 401(k) plans have higher contribution limits, employees can save more money with an employer-sponsored 401(k) than with state-mandated IRAs. Gusto’s own analysis has even found that employer-sponsored 401(k) offerings increase employee retention.
Not sure which choice would be the best fit for your business? This table lines up the features of a 401(k) versus MarylandSaves to help you decide:
| Features | 401(k) | MarylandSaves WorkLife Account |
| Auto-enroll | Available | 5% |
| Auto-escalation | Available | 1% increase each year on enrollment anniversary up to 10% |
| Payroll integration | Available | Available |
| Investment options | Large range of funds that varies based on the provider | 13 funds |
| Employer matching and profit-sharing contributions | Available | No |
| Investment advice | Available | No |
| Taxability | Pre-tax and after-tax contributions available | Roth after-tax contributions |
| Annual contribution limit | $23,000 for employees ($30,500 for those 50 and older), plus optional employer contributions | $7,000 for employees ($8,000 for those 50 and over) |
| Participant fees | Varies, but often ranges between 0.5% and 2% of the plan balance annually | There’s an annual asset-based fee that’s about 0.18% and a $30 account fee ($7.50 of this amount is charged quarterly). |
If you have an existing Gusto account, learn more about our 401(k) partners here.
Or create an account with Gusto to enroll in a 401(k) plan. Gusto’s platform makes that simple.
