MarylandSaves, Maryland’s new automatic workplace retirement and emergency savings program, is slated to launch next summer. The state says it is the first state-sponsored automatic private retirement program that will provide income in retirement.
The program will be administered by a team composed of Vestwell, Sumday, and BNYMellon, and all savings will be managed by BlackRock, State Street Global Advisors, Lincoln Financial Group, and T. Rowe Price.
Participants in the program will have their assets automatically converted into a monthly paycheck at retirement age unless they choose otherwise. They will also have the option to increase their Social Security payments by deferring Social Security enrollment and instead receiving their MarylandSaves funds first.
Because Americans who begin claiming Social Security before their full retirement age of 67 don’t get their full benefits, MarylandSaves’ Social Security Bridge option is intended to allow savers to defer claiming Social Security by using their MarylandSaves funds and thus increase their Social Security benefit by 8% for every year they defer.
“Beginning next summer, more than 1 million Marylanders will have a better chance for financial security,” MarylandSaves Chair Josh Gotbaum, a former director of the Pension Benefit Guaranty Corporation (PBGC), said in a statement. “Building on years of work both here and in other states, our program will be a rarity: an automatic workplace retirement program that doesn’t stop working when you retire and need it most.”
Under Maryland law, established businesses that use an automatic payroll system are required to either offer a retirement plan or sign their employees up for the MarylandSaves program. Businesses that participate in the program will receive $300 per year via a waiver of the Maryland business annual filing fee, and they will have no payment obligations, no federal reporting requirements, and pay no fees to MarylandSaves for the service.
Although employee participation is voluntary, they will be automatically enrolled in the program and will be able to withdraw funds, choose investment options, change their savings amount, or opt out at any time. The state says account fees will be lower than commercial alternatives, and the retirement plans will be portable so workers can keep their accounts if they change jobs.
Contributed funds will initially go into an emergency savings account using the Lincoln Financial Stable Value Fund, which currently has a guaranteed interest rate of 1.4% with no separate investment fees.
Once the emergency savings account is funded, the participant’s contributions will be invested in an age-appropriate BlackRock Target Date Fund. Optional investment choices include State Street’s Aggregate Bond Index Fund, which is an income fund, and the T. Rowe Price Global Growth Stock Fund. The default option will be a monthly payment calculated to for last a saver’s lifetime, though it will not be guaranteed.
The MarylandSaves program is overseen by a board whose members include the Maryland state treasurer, the Maryland secretary of labor, and three members each appointed by the governor, the president of the state Senate, and the speaker of the state’s House of Delegates.
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Tags: automatic retirement plan, BlackRock, BNYMellon, Lincoln Financial Group, Maryland, MarylandSaves, State Street Global Advisors, Sumday, T. Rowe Price, Vestwell