MAINE RETIREMENT PLAN MANDATE: HELP BUSINESS OWNERS BENEFIT
It’s the law: Passed June 2021, “An Act To Promote Individual Savings Accounts through a Public-Private Partnership” will require that covered employers automatically enroll covered employees into the newly formed Maine Retirement Savings Program.
A covered employer with less than five (5) employees is not mandated to participate in the Maine Retirement Savings Program. Government entities (federal, state or municipal) are not covered employers and are not eligible to participate.
A covered employee is anyone 18 years of age or older who is employed by a covered employer and who has taxable wages in Maine. This may include part-time and seasonal employees, although there are exceptions.
Those who haven’t yet adopted an employer-based plan have two choices:
- Adopt their own retirement plan
- Maine businesses do not have to wait for the state’s Roth IRA program to launch and can open an employer-sponsored retirement plan such as a 401(k) or even a Pooled Employer Plan
- The board in charge of launching Maine’s program is working on implementing policies and regulations for how the program will run. Stay tuned
Contact your Regional Plan Consultant
- Adopt their own retirement plan
Enrollment will be in three phases beginning in 2023 with the following dates:
- April 1, 2023: a covered employer with 25 or more covered employees
- Oct. 1, 2023: a covered employer with 15 to 24 covered employees
- April 1, 2024: a covered employer with 5 to 14 covered employees
Non-Compliant Employers Face Stiff Penalties:
Employers who don’t comply with the Maine retirement plan mandate by their deadline date are subject to civil actions and are punishable by imprisonment & fines:
- $20 per employee between July 1, 2025 and June 30, 2026
- $50 per employee between July 1, 2026 and June 30, 2027
- $100 per employee on or after July 1, 2027
Subject to civil action – brought by employee or Labor Commissioner to require employer to enroll employee
- Punishable by imprisonment & fines – based on amount employer failed to contribute
You can help your clients avoid these fines and offer a retirement plan that will:
- Comply with the Maine mandate
- Reduce taxes
- Control costs
- Attract and retain top talent
- Maximize business value
- Enable them to work with their preferred business partners
Maine State-Mandated Program OR CUSTOMIZED PLAN?
Maine State-Mandated Program is a basic, one-size-fits-all retirement savings program for businesses that do not wish to sponsor a plan for their own employees. Yet there are many businesses that would be better served with a plan from TRA that’s customized to their needs.
|Maine State-Mandated Program||Custom 401(k) from TRA|
|Pre- and Post-Tax Deferrals||Roth IRA w/ auto after-tax payroll deduction||Pre-tax or Roth elective deferral contributions|
|Contributions||Auto-enrolled at a 5% contribution rate||Lesser of 100% of compensation or $22,500|
|Catch-Up Contributions||Determined by Roth IRA contribution limits||$7,500 annually for those age 50 and older|
|Employer Match||Not available||Available|
|Income Limit||Determined by Roth IRA contribution limits||No income limits|
|Investment Choices||Default investment option and investments to be determined||Can provide a wide variety from top asset managers|
|Automated Payroll Integration||Based on investment options||Available|
|Customizable for businesses||Not customizable||Yes – for example, Safe Harbor, SIMPLE, Profit-Sharing & Cash Balance|
|Tax Credit||TBD||Yes – 50% of the expenses paid up to the greater of $500 or the lesser of $250 for each non-highly compensated employee, not to exceed $5,000|
TRA Plans to Consider
For Maine businesses who want to sponsor a retirement plan, some plans to consider include:
• Safe Harbor 401(k)
• Cross Tested Profit-Sharing Allocation
• 401(k) plus Cash Balance Plan
Other alternatives to Maine State-Mandated Program include SIMPLE 401(k) Plans, Group 401(k) Plans (MEPs, PEPs and Aggregation Programs), and 403(b) Plans (for non-profits).
Working closely with you, TRA will create a customized plan that meets your client’s business. We partner with top recordkeepers and investment managers around the country and deliver exceptional client service. We also offer 3(16) Plan Administration Relief Services (PARS) to relieve business owners of day-to-day plan administration responsibilities and manage their fiduciary risk.