The Pine Tree State is poised to become the latest state to offer a state-run retirement plan to provide coverage to those whose employers do not offer a plan.
The Maine House of Representatives and Senate both passed LD 1622, An Act To Promote Individual Retirement Savings through a Public-Private Partnership, on June 17. The Senate did so unanimously. It was introduced by Sen. Eloise Vitelli (D-Sagadahoc). The bill now awaits action by Gov. Janet Mills; she has 10 days to sign it into law, veto it or allow it to become law without her signature.
The Program
The measure would require each covered employer to allow its covered employees to decide whether or not to contribute to a payroll deduction Roth IRA by automatically enrolling them but with the opportunity to opt out. It also provides that covered employees who opted out would be automatically reenrolled at regular intervals but have the opportunity to opt out again. It also provides that the Maine Retirement Savings Board could expand the options available to employees by also allowing them to contribute to a traditional IRA.
Covered employees would automatically initially contribute 5% of their salary or wages and may elect to contribute at a higher or lower rate. It also calls for an annual increase of contribution rates by no more than 1% of wages or salary to a maximum of 8%. The measure would not allow employer contributions.
The bill also allows individuals who are not employees, such as the self-employed and independent contractors, to participate in the program.
Maine Retirement Savings Board
The bill would establish the Maine Retirement Savings Board to develop and run the program. The board would:
- develop, establish, implement and maintain the program;
- conduct market, legal and feasibility analyses if the board considers them advisable;
- adopt rules the board considers necessary or advisable for the implementation and general administration and operation of the program;
- use private-sector partnerships to contract with a program administrator to administer the program and manage the investments under the supervision and guidance of the board;
- cause funds to be held and invested and reinvested under the program; and
- develop and implement an investment policy that defines the program’s investment objectives consistent with the objectives of the program and that provides for policies and procedures consistent with those investment objectives.
Implementation Deadlines
The measure provides that:
- beginning April 1, 2023, the board shall require a covered employer with 25 or more covered employees to offer the program to its covered employees;
- beginning Oct. 1, 2023, the board shall require a covered employer with 15 to 24 covered employees to offer the program to its covered employees; and
- beginning April 1, 2024, the board shall require a covered employer with 5 to 14 covered employees to offer the program to its covered employees.
“Studies show the best way to help people build their own retirement savings is to give them the opportunity to save through their employers. However, these plans can be costly and complicated to implement for Maine’s small businesses. As a result, one out of every three Mainers over 65 relies only on Social Security for their income, but with an average monthly benefit of just $1,100, this isn’t enough to get by,” said Vitelli in a press release, continuing, “LD 1622, the Work and Save bill, presents a solution to help working Mainers put aside their own money for their retirement.”