Maryland Small Business Retirement Savings Program and Trust

A critically important issue for the JLC this year was legislation arising from previous efforts to establish a state-run retirement plan.  The issue is so far-reaching that JLC constituents NAIFA MD and MAHU have participated for the past several years in the Retirement Planning Coalition (RPC) which has become the most respected advocacy vehicle to address this legislative issue.  Former NAIFA Maryland President Paul Dougherty chairs the RPC and provided testimony on the bill, as did JLC Co-Chair Willie Franklin.

This year, we worked closely with Senator Doug Peters, the prime sponsor of SB1007, and his colleague Senator Andy Serafini, a financial advisor who is well respected by his fellow members of the Senate Budget and Taxation Committee.

With RPC guidance, the 2016 debate shifted from establishing a top-down, state-run retirement plan to creating an IRA plan for employees, with a very light employer mandate that is intended to comply with a proposed federal regulation establishing a “safe harbor” that would survive an ERISA preemption challenge.

While we would prefer no state-run plan, of any description that would compete in any way with the private market, this plan is scaled back considerably from previous versions.  In its final form, the bill should allow a substantial number of private sector competitors to offer their IRA products.  The bill is intended to work this way:  Employees of a participating employer could (but would not have to) send contributions to an IRA they choose from a list of private sector providers chosen by the Board to be created under the bill.  Insurance companies, for example, could offer their products subject to Board approval.  In this sense, the plan is similar to the Washington State “marketplace” distribution model.  Contributions would be bundled and sent to a Trust which would distribute them to various IRA providers in accordance with the instructions of the individual employee.  Hopefully, this program will allow our members an additional option to serve as advisors to the individual employees of businesses that do not currently have an ERISA plan.

Furthermore, the employer “mandate” under the bill is quite modest.  Basically, an employer who 1) possesses a payroll deduction capability and 2) makes it available for this purpose would be able to waive the $300 annual business license fee currently required under Maryland law.  (Businesses that sponsor ERISA plans will also receive this waiver). If an employer chooses not to participate, he would not receive the waiver.

Many questions remain with respect to the implementation of this legislation.  Will the Governor sign it?  Will there be sufficient funding to establish the program?  Will the Board created under the bill carry out the legislative intent completely?  At this point, we simply don’t know, but we will continue, through the RPC, to be actively engaged in this process.  It is our hope, and our goal, that the outcome will mean an additional opportunity for our members, additional revenue to be earned, and additional services that we can provide our clients.