Last Updated: October 10, 2024

In Maine, 40% of the private-sector workforce lacks access to a retirement savings program. The state recognized the need for a solution for residents seeking long-term financial security and stability, so they passed legislation to establish a state-run retirement savings program for employees.

MERIT, the Maine Retirement Investment Trust, was created to bridge Maine’s retirement savings gap and enable employees to prepare for their future.

In this article, we’ll answer some questions you may have about the MERIT program and explain how it affects Maine businesses.

How Does MERIT Work?

Launched in January 2024, MERIT is a government-sponsored savings program created to help employees working in the state build savings for retirement. Maine business owners who meet certain criteria are required by law to offer a qualified, employer-sponsored retirement plan or enroll their employees in the program.

Maine employees will contribute to the program through automatic deductions from their paychecks into a Roth individual savings account (Roth IRA) unless they choose to opt out. The money in the account will grow tax-free, and employees won't have to pay income tax on any money they withdraw from their account during retirement. The default savings rate begins at 5% and increases by 1% annually up to 10%, but each individual can elect a higher or lower percentage.

MERIT is overseen by the Maine Retirement Savings Board.

Which Businesses Are Affected?

According to the MERIT website, employers who meet the following criteria are required to register for the program:

• Employs 5 or more workers
• Has been in business for at least 2 calendar years
• Does not currently offer a qualified, employer-sponsored retirement plan to their employees

Employers who already offer a qualified plan, or choose to start one, can certify their exemption from the program.

Registration Deadline

Businesses do not have to wait until their deadline to register for MERIT. Program deadlines for businesses are based on company size, and they have all passed.The breakdown is as follows:

• Employers with 15+ employees | April 30, 2024 (deadline passed)
• Employers with 5-14 employees | June 30, 2024 (deadline passed)

These registration deadlines have passed, but you can still take action.

Penalties

Beginning on July 1, 2025, businesses that fail to comply with the requirements may face penalties. Fines for failing to enroll an eligible employee include:

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

Who is Eligible to Save With the MERIT Program?

Most individuals who are 18 years or older and have earned wages in Maine for at least 120 days, including part-time and seasonal employees, are eligible to participate in the MERIT program.

The program is voluntary for employees, and they can change their contribution amount or opt out at any time.

Conclusion

The MERIT program represents a notable development in retirement planning for Maine workers. With automatic enrollment and contributions made directly through payroll deductions, it simplifies the process of setting aside funds for retirement.

The program requires businesses with five or more employees that have been operating for two years to either participate in MERIT or certify an exemption, so it’s important for Maine employers to familiarize themselves with the program details and requirements.