AUGUSTA, Maine — Maine is set to launch a pilot program this fall to provide retirement savings accounts to workers who are not eligible for them through their jobs.
With a key sign-up deadline approaching, here’s what workers and companies should know about the Maine Retirement Savings Program.
How will the Maine Retirement Savings Program work?
Initially created in 2021 through a bill sponsored by Senate Majority Leader Eloise Vitelli, D-Arrowsic, the Maine Retirement Savings Program allows workers whose employers do not offer their own retirement plans to contribute a portion of each paycheck to a Roth IRA.
The Roth IRA stays with workers from job to job until they are ready to retire.
As a smaller state, Maine is receiving assistance from a state that already has a similar retirement program. The Maine Retirement Investment Trust, which has an executive director and nine-member board to oversee the program, established a partnership earlier in August with the Colorado SecureSavings Program.
Officials in both states said the first-in-the-nation partnership will lead to more participants and lower fees in both Maine and Colorado, which so far has 12,000 registered employers in its state-run plan.
Elizabeth Bordowitz, executive director of the Maine Retirement Investment Trust, testified to lawmakers that a partnership allows for the states to share administrative costs.
That will help with the long-term stability of the retirement program, Bordowitz added, noting a draft study showed Maine’s program can become self-sustaining in 10 to 12 years “with some additional help” from the Legislature.
How many Maine employees lack employer-sponsored retirement plans?
About 235,000 people, or 46 percent of private-sector employees in Maine, do not have access to employer-sponsored retirement savings programs, according to AARP.
National estimates have found roughly a quarter of working-age adults in the U.S. have no retirement savings.
How much money is deducted from each paycheck?
Five percent of earnings will automatically go to the Roth IRA each pay period, with that rate automatically rising by 1 percent each year until reaching 10 percent, but employees can change the deduction amount and contribute more than 10 percent.
They also can choose how the funds are invested and opt out of the program at any time.
What are the requirements for employers?
Maine businesses that employ five or more people and do not already offer a retirement plan for workers are required to enroll in the Maine Retirement Savings Program.
Employers cannot contribute any funds to the plan. They only need to identify their participating staff and make payroll deductions, while the state-sponsored program will handle the rest.
Employers do not need to participate in the Maine Retirement Savings Program if they offer a qualified retirement plan to some but not all employees. So, for example, if an employer offers 401(k) to full-time employees but not part-time ones, it doesn’t need to participate in Maine’s program.
When does the Maine retirement program begin?
Under the 2021 legislation, officials had hoped to start the retirement program this year but decided more time was needed to prepare for its implementation.
A second bill from Vitelli that Gov. Janet Mills signed this summer extends the start date and implementation process.
A pilot program will start in October featuring a limited number of employers. Any company with five or more employees that has been in business for at least two years and operates in Maine is eligible to apply.
Companies have until Sept. 10 to sign up for the pilot, and Bordowitz said eight employers have registered so far. To apply, employers should visit mainesaves.org/join-the-pilot. Mainers can also submit comments on the program until Oct. 2 via mainesaves.org/rules or by attending a Sept. 20 public hearing at the Burton M. Cross State Office Building in Augusta.
Enrollment will open to all workers and their employers starting in the first quarter of 2024, with the goal of signing up all employers by the end of next year. Starting in 2025, employers who fail to enroll employees “without reasonable cause” will face maximum fines of $20 per employee, with that penalty rising to $100 by 2027.
How many states offer these retirement savings programs?
More than a dozen states have set up or are implementing various versions of government-backed retirement savings programs, with the reviews generally positive so far.
While skeptics may question why most employers are required to sign up, supporters note businesses do not pay into the program. The New England states of Vermont, Connecticut and Massachusetts have different forms of these programs.
Have a question not answered here? Ask it below.
Do you have a question that wasn’t answered here? Ask us below.
[wpforms id=”3255298″]
