If you own a business in Maryland, you have likely received notices regarding “MarylandSaves.” For many business owners, these notifications trigger immediate concern: Is this another tax? Is it a new administrative burden? Will it cost the company money?
The Maryland retirement plan mandate is now in full effect, and it changes how many small businesses in the state handle employee retirement benefits. The state now requires eligible employers to offer their workers a retirement savings program. However, a common misunderstanding about this rule is that while compliance is mandatory, you do not have to settle for the state’s default plan. For some Maryland employers, the state-sponsored program may feel limiting depending on their goals. This guide outlines who must register, how the MarylandSaves program works, and how the state account compares to a private 401(k) for high-revenue businesses.
Key takeaways
- The requirement: Maryland businesses that have at least one employee (W-2), have been in operation for the past two calendar years, and use an automated payroll system are required to facilitate MarylandSaves or offer a qualified retirement plan.
- The alternative: Establishing a private employer-sponsored retirement plan, such as a 401(k), may satisfy the mandate while offering higher contribution limits ($24,500 vs. $7,500 for 2026) compared to the state’s Roth individual retirement account.
- The incentive: Companies that participate in MarylandSaves (or claim an exemption because they already offer a retirement plan) qualify to waive the $300 annual report filing fee.
The action: Business owners should consult a financial advisor to evaluate the potential tax advantages of a private qualified retirement plan before defaulting to the state option.
The Maryland retirement plan mandate explained: Who must register?
Before anything, you should first find out if the requirement actually applies to your business.
The state cast a wide net to address what they call the “coverage gap.” Approximately 43% of Maryland private-sector employees lack access to a sponsored retirement vehicle through their jobs. To close this gap and help workers build retirement savings, the law requires employers to give employees access to retirement options.
The criteria for mandatory registration
You must register for MarylandSaves if your business meets all of the following criteria:
- Employment: At least one employee is over the age of 18.
- Longevity: You have been in business for at least two calendar years.
- Payroll: You use an automated payroll system or a payroll service to pay your team.
If you meet these thresholds, you must either enroll your employees in the state program or certify that you are exempt.
The exemption
Businesses that already provide a qualified retirement plan are typically exempt from joining the state-run program. This includes plans such as a 401(k), a SIMPLE IRA, or a governmental-deferred compensation plan (for applicable entities).
However, you must still log in to the state portal and certify your exemption. Doing so helps you avoid penalties and qualifies you for the waiver of the annual report filing fee.
How does MarylandSaves work?
If you choose to use the state option rather than a private plan, it is important to understand the logistics.
The employer’s role
MarylandSaves is designed to keep things simple for employers, minimizing administrative responsibilities. Your role is purely facilitative:
- No employer contributions: You are not allowed to make matching employer contributions to the state plan.
- Payroll deductions: Your primary responsibility is to link your payroll system to deduct employee contributions and submit payroll contributions to the program.
- No costs: There are no employer fees to participate. You simply manage the payroll processing.
The employee’s experience
For employees, MarylandSaves is built for ease:
- Automatic enrollment: Upon employer registration, eligible workers are automatically enrolled at a default contribution rate of 5% of their gross income. Contributions go directly into the employee’s WorkLife account, which is a Roth individual retirement account (IRA).
- Annual auto-escalation: The contribution rate increases by 1% annually on the worker’s enrollment anniversary, up to a predefined cap, encouraging consistent saving.
- Emergency savings funds: The first $1,000 contributed is allocated to an emergency savings fund, providing liquid access to short-term financial needs.
- Target date investments: After the $1,000 threshold, subsequent money flows into an investment with a target retirement date option, which adjusts risk based on the expected retirement year.
- Flexibility and control: Employees can opt out of the program, change their contribution rate, or withdraw their funds at any time.
State Roth IRA vs. private 401(k): A comparison
MarylandSaves can be a helpful starting point for employees who are new to saving. However, for high-income earners focused on building long-term retirement savings, it might not be the most effective option.
The key difference lies in the type of retirement account: MarylandSaves uses a Roth IRA, while private plans typically rely on a 401(k). This distinction significantly impacts wealth-building potential.
Contribution limits
The most notable contrast between the two investment options is how much you can contribute each year:
- MarylandSaves: The contribution limit for 2026 is capped at $7,500.
- Private 401(k): For the same year, employees can contribute up to $24,500.
For business owners paying themselves a salary, the MarylandSaves plan heavily restricts how much they can save. In contrast, a private 401(k) allows for higher contribution limits, which may allow individuals to save more toward retirement.
Tax strategy and profit-sharing
Private 401(k) plans also offer additional advantages beyond higher contribution limits. For instance, they allow for profit-sharing, where a business can make tax-deductible contributions to the owner’s account and eligible employees’ accounts. On the other hand, the MarylandSaves Roth IRA does not permit employer matching or profit-sharing, limiting its flexibility and tax advantages.
Below is a comparison of MarylandSaves and private 401(k) plans:
| Feature | MarylandSaves | Private 401(k) |
| Account type | Roth IRA | 401(k) |
| 2026 contribution limit | $7,500 (employee only) | $24,500 (employee) + employer profit-sharing |
| Tax deductions for business | Limited (no employer contribution) | Significant (employer contributions are tax-deductible) |
| Administrative cost | Free | Varies |
For employees: Should you opt out?
If you notice a new “MarylandSaves” deduction on your paystub, you might wonder whether to stay enrolled. For many, the automatic 5% contribution is a solid starting point for saving.
High-income earners, however, should take a closer look. Depending on your income and long-term goals, a 5% contribution to a Roth IRA may not be sufficient on its own. Consider this mandate a prompt to review your overall financial strategy.
Deadlines and next steps
The state is firm on closing the retirement savings gap and enforcing labor laws. Here’s what you need to know:
The deadline
Employers must register or certify their exemption before the deadline indicated in their notification. For the majority of employers, this date coincides with the filing schedule for the state’s annual report.
Your options
You have two choices:
- Register for MarylandSaves: This is the simplest option, requiring minimal effort. However, it comes with lower contribution limits that may not maximize retirement savings.
- Start a private 401(k): Opting for a private 401(k) satisfies the mandate, qualifies you for the state’s fee waiver, and allows for higher contribution limits and potential tax advantages. However, setup and ongoing administration costs are typically higher than MarylandSaves.
Turn a compliance requirement into a financial opportunity
The Maryland retirement plan mandate is more than just a regulatory checklist item for compliance; it’s an opportunity to rethink your financial strategy. It invites both employers and employees to ask, “Are we doing enough to secure our financial futures?”
Take note that while the state’s default program provides a helpful starting point for retirement savings, it may not necessarily align with your long-term financial goals and tax strategies.
MY Wealth Management’s fiduciary advisors help business owners evaluate their options beyond the basic state program. Start your FREE retirement evaluation today to refine your strategy and clarify your next steps.
