New Law: Maine’s Retirement Savings Program

January 30, 2024

What is it?  On June 23, 2021, Governor Mills signed into law L.D. 1622, An Act to Promote Individual Retirement Savings through a Public-Private Partnership. The goal of this law, which recently took effect, is to provide a simple way for Maine employees to have and utilize a retirement savings account, given that, according to the Maine Retirement Investment Trust (MERIT), more than 200,000 Mainers do not have access to retirement savings through employment. The law requires that covered employers who (1) do not offer a qualified retirement plan, (2) have more than five employees, and (3) have been in business for two or more years are either required to register to participate in the Maine Retirement Savings Program through MERIT or certify exemption from the program if the covered employer either offers a qualified retirement plan to employees already, or has fewer than five employees.

Who is a “Covered Employer”?  The law defines a covered employer to include a person or entity engaged in business, industry, profession, trade or other enterprise in the state, whether for profit or not for profit, that has not offered to its employees a specified tax-favored retirement plan at any time within the current calendar year or two preceding calendar years.  The definition of a covered employer does not include:

  • An employer that has fewer than five covered employees as of the date the covered employer provides an exemption certification or onboard with the program;
  • The federal government, the state of Maine, or any other state, any county or municipal corporation or any of the state of Maine’s or any other state’s units or instrumentalities; or
  • An employer that has not been in business during both the current calendar year and the preceding calendar year.

Covered employers are obligated to comply with the registration deadlines (discussed below), and are required to administer a payroll deduction for enrolled employees. In addition, employers should be mindful to track contribution limits (and income limits) for Roth IRAs. Covered employers are not required or permitted to contribute to the retirement program itself, and are not responsible for the fees associated with the program.  Further, if an employer does not maintain a specified tax-favored retirement plan for a portion of a calendar year ending on or after the effective date of the law, but does adopt a plan for the remainder of that calendar year, the employer is not considered a covered employer for the remainder of the year.

Do I qualify for an employer exemption?  Covered employers may qualify for an exemption if the covered employer already offers a qualified retirement plan (examples of which include 401(a), 401(k), 403(b), SEP IRA, and SIMPLE IRA plans), or maintains fewer than five covered employees. Note that if the covered employer offers a qualified plan to some, but not all employees, the covered employer is still eligible for an exemption from participating in the program, even if not all employees are eligible to participate in the qualified plan. In addition, according to the proposed rules, if an employer is not considered a covered employer because the employer has been in business for fewer than two years, the employer is eligible for an exemption that will expire when the employer has been in business for two calendar years.

Who is a “Covered Employee”?  A covered employee is an individual who is 18 years or older, works for a covered employer, and has wages or other compensation that are allocable to the state of Maine during a calendar year. It is our understanding from the Maine Retirement Savings Board that part-time and temporary employees are included within the definition of covered employees, and seasonal employees are included only if they have worked for 120 days or more. The standard payroll investment contribution is automatically set to 5%, and will automatically increase by 1% each year until it reaches 10%. Covered employees are permitted to adjust their contribution rate, or even choose to opt out of the program. An employee’s decision to opt out of the program does not, however, impact a covered employer’s obligation to enroll covered employees in the program.

Are There Fees for Covered Employers?  Covered employers are not responsible for paying for costs associated with the program.  Instead, a low fee will be charged to enrolled employees. According to MERIT, the annual asset-based fee is approximately 0.32%, or approximately $.032 for every $100 in the employee’s account. In addition, employees are responsible for a $22 annual account fee, which will be charged quarterly at $5.50 each quarter, in order to pay for the administration of the program and associated operating expenses.

Are There Important Dates & Deadlines?

  • January 2024: MERIT portal becomes available to all employers; employers identified as covered employers will receive e-mail or letter correspondence including a program registration code.
  • April 30, 2024: Deadline for employers with 15 or more employees to register employees
  • June 30, 2024: Deadline for employers with 5 or more employees to register employees

Penalties for Noncompliance?  Covered employers who fail to comply with the requirements of this law are subject to penalties for each covered employee and relative to each calendar year or portion of a calendar year where the covered employee was not enrolled in the program or had not opted out of the program.  The penalty maximums are set as follows: $20 per covered employee from July 1, 2025 to June 30, 2026; $50 per covered employee from July 1, 2026 to June 30, 2027; after July 1, 2027, $100 per covered employee.

Next Steps?  In mid-January 2024, e-mails with program registration codes were sent to employers identified as covered employers and hard copy correspondence will follow for businesses without e-mail addresses on file with the Maine Department of Labor.  If you receive an e-mail or letter and you are a covered employer, you will need to enroll in the program or assess whether you may qualify for an exemption.  We recommend checking your spam folders for e-mail correspondence. If you have fewer than five employees and receive an e-mail or letter, you will need to file for an exemption.  If you have fewer than five employees and do not receive a code to register, no action is needed.  For more information, please contact us below.

Contact Attorneys

Alyssa C. Tibbetts, Esq.

Paige E. Eggleston, Esq.