Employer's guide to MERIT and Maine's state-mandated retirement program

What is Maine’s retirement mandate?

Simply put, by law the mandate requires that all Maine businesses offer their employees some type of qualified retirement savings program. Employers have the option to sponsor their own retirement plan, such as a 401(k), SIMPLE IRA, or offer employees access to MERIT.

In 2021, An Act to Promote Individual Retirement Savings through a Public-Private Partnership was passed. At the time, the state of Maine decided to collaborate with Colorado’s Secure Savings (the centennial state’s mandated retirement program) in order to accelerate the implementation of their own program. In 2023, an amendment to the original Act was passed in Maine. It provided for a phased-in implementation, while extending the time that employers have to register for the program.

Why are programs like MERIT becoming more mainstream?

In short, many Americans are approaching retirement age without having enough savings to live on once they leave the workforce. This creates challenges for many states, including Maine, where 14% of the population and about 40% of the state’s active workforce, or more than 200,000 employees lack access to a retirement savings plan.

The result? State-mandated retirement plans, such as MERIT, are gaining traction across the country. In most cases, these state-facilitated programs require employers who do not have a qualified retirement plan to provide their employees with access to one (whether through the state plan or a private carrier).

What are MERIT’s registration deadlines?

MERIT began with a 2023 pilot program that allowed employers with more than 25 employees to voluntarily begin registering for the program. Registration opened for MERIT earlier in January 2024 and employers need to be aware of the following deadlines:

Employers with five or more employees

• Starting in January 2024, Maine employers are required to enroll in MERIT if they have five or more employees

Employers with 15 or more employees

• Maine employers with more than 15 employees will need to register for MERIT by April 30, 2024

Employers with 5-14 employees

• Employers with between 5 – 14 employees will need to register for MERIT by June 30, 2024

All employers that are required to sign up will be notified by MERIT when it’s time to register. You will need the following information to register your business:

• Federal Employer Identification Number (EIN)
• The MERIT access code that is included in your notice

If you wish to register without receiving notification from MERIT, you can look up your business access code online. Additional information about MERIT and its program requirements can be found on the program details page.

What type of savings plan does Maine’s mandate have in place?

MERIT is free for employers. Once they sign up for a Roth IRA, employees will pay a small administrative fee. It is important to note that under MERIT rules, an employer is not permitted to contribute to their employee’s individual retirement savings account.

Once a company is registered and their employee’s information is uploaded, 5% of an employee’s pay will automatically be deducted from their paycheck and contributed to an individual Roth IRA. Moreover, the IRA is portable, without being attached to a single employer. In other words, the employee is free to take their retirement savings plan with them if they change employers or leave the workforce.

The 5% deduction is automatic unless the employee chooses to opt out of participating in the program. Any employee that opts out will automatically be reenrolled during the next enrollment period, with the option to once again opt out if they choose. Employees also have the option to change the default 5% contribution.

What are Maine employers responsible for?

Maine employers are responsible for registering for MERIT in 2024. Once registered, employers need to complete the four-part onboarding process, which includes providing the following information:

• Company legal name and/or DBA
• Company address and phone number
• Payroll information including information on current payroll provider
• Current pay schedule
• Payment setup including adding banking information for employee contributions
• Employee information — this can be completed by uploading a file or using the employee template. Required  information includes: Social Security number, employee first name and last name, date of birth, physical address, and email address

While employers are responsible for the above tasks, they are not responsible for the following:

• Enrolling employees into the Roth IRA
• Managing any investment options
• Processing employee changes to their investments
• Managing employee account changes including contribution changes or opt-outs
• Processing distributions from employee Roth IRA accounts
• Matching employee contributions

Are there any employer exemptions?

Keep in mind that if a business already has a qualified retirement plan in place, an employer can choose to opt out of participating in MERIT. That said, the business will still have to register if it offers one of the following qualified retirement savings plans:

Employers can also opt out of participating in MERIT if they have fewer than five employees. However, they will have to call the MERIT service team at (833) 608-8811 to update their business information to avoid being charged with fines for not registering. Any business, regardless of the number of employees, can voluntarily opt to participate in MERIT.

Let’s cover some things employees may want to know about Maine’s new state-sponsored retirement plan.

What Maine employees need to know about MERIT

If team members are curious about how MERIT works, here are some of the main issues they may have questions about:

• MERIT is open to employees who have earned taxable wages from a Maine employer for at least 120 days
• Employees don’t have to do anything to participate, since they will automatically be enrolled in MERIT by their employer, with a default employee contribution of 5%
• Employees also have the option to change the contribution level from the default 5% if they choose to and can also opt out of participating altogether
• Self-employed individuals also have the option to sign up for an individual account as long as they are 18 years old

How are plans funded?

MERIT was initially established with $1.6 million that the state of Maine received in a settlement with Moody’s Investor Services. Moving forward, participating employees will pay an asset-based fee of $0.32 for every $100 of plan assets. Employees will also pay a $22 annual fee that is charged quarterly.

MERIT is managed by an independent board with the intention in the future of having the program become self-sustaining.

Are there penalties for ignoring Maine’s retirement mandate?

Please don’t blame the messenger, but there are penalties for any employer who does not comply with Maine’s retirement mandate and registration requirements. Penalties go into effect on July 1, 2025, and are as follows:

• $20 per covered employee from July 1, 2025, to June 30, 2026
• $50 per covered employee from July 1, 2026, to June 30, 2027
• $100 per covered employee on or after July 1, 2027

That said, the penalty structure gives employers time to learn about how the state’s program works, the steps they need to take to comply with, and if they are required to follow the mandates in place.

More resources for Maine employers

For more information about MERIT, be sure to check out the following resources.

• MERIT employer flyer with information
• Maine Retirement Investment Trust
• Employer FAQs
• Employee/saver FAQs