Businesses with 5-plus Employees Eligible for Maine State Retirement Savings Program

Less than three years after the Act to Promote Individual Retirement Savings through a Public-Private Partnership became law, the Maine Retirement Investment Trust (MERIT) launched on Jan. 17, 2024. This is a state-facilitated Roth IRA program and the law requires Maine businesses with 5 or more eligible employees to provide a workplace retirement plan. 

Why Does Maine Need a Retirement Savings Program?

The Maine law, designed to help address the growing retirement crisis in the United States where near-retirement households have a median retirement account balance of $14,500¹, went a step further than most states. The Maine retirement savings plan would allow individual contractors and the self-employed to participate.

This is particularly important in Maine where unincorporated self-employment (as a percent of total employment) is above the national rate, according to the Maine Department of Labor. At one point less than a decade ago, the self-employment rate in Maine was 3 percent higher than the national rate. Nearly 70,000 individuals describe themselves as self-employed in Maine.

The Maine state retirement system also will offer employers a key recruitment and retention tool, a major plus in a tight labor market.

Definitions in the Maine Retirement Savings Program

MERIT is a payroll deduction Roth IRA that must be offered by a covered employer.

A covered employer is defined as an individual or entity engaged in business or trade in the state of Maine, whether for profit or not for profit, who has been in business during the current year and prior calendar year and has not offered a qualified retirement plan to some or all of its covered employees in the preceding two years. A covered employer with less than five (5) employees is not mandated to participate in MERIT. 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 has been employed for at least 120 days by a covered employer, and has and who has taxable wages in Maine. This may include full-time, part-time, and per diem employees, although there are exceptions.

What Covered Employers Should Know About MERIT in Maine

Covered employers will be required to enroll employees automatically in the workplace retirement savings plan and re-enroll them annually if they opt out. Employers also cannot match contributions in the plan. 

The original registration deadlines based on business size have passed:

• 15+ employees: by April 30, 2024
• 5 to 14 employees: by June 30, 2024 
• All future employers: Dec. 31 (of year after meeting employer requirements)

Employers can satisfy the mandate in Maine if they offer their own employer-sponsored retirement plan.

There are penalties for employer noncompliance regarding registration, including:

• $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 

What Employees Should Know About the Retirement Savings Program

Covered employees who wish to participate will have 5% of their salary or wages per paycheck automatically contributed. They can choose to give a higher or lower rate with the rate increasing by no more than 1% annually, up to a maximum of 10% by law.

Employees in the Maine program also can opt out of participating, and will be re-enrolled annually, but will have the opportunity to opt out again.

Looking Forward

Maine businesses can open an employer-sponsored retirement plan such as a 401(k) or even a Pooled Employer Plan through a provider such as Paychex to satisfy the mandate.

¹National Institute of Retirement Savings, “The Continuing Retirement Savings Crisis”