Helping Maine's Small Businesses and Startups Provide Retirement Benefits
News
By Dan Piltch, Managing Partner at Broad Sound Partners
In another installment of our guest blog series, we wanted to highlight the Maine Retirement Investment Trust, which is a relatively new program in the state meant to improve the lives of those working for Maine’s small businesses - including startups. Our author for this post, Dan Pilch, lives in Freeport and was appointed by Governor Janet Mills to serve on the inaugural board of the program when it was launched in 2021. We appreciate Dan taking the time to explain the program and its positive impact in the state.
That moment when … your startup is big enough to start offering employee benefits. While I can’t provide information on the whole suite of available benefits, there is a new option available for retirement plans that will likely be of interest to growing startups in Maine.
In January 2024, the Maine Retirement Investment Trust (MERIT) opened up for enrollment for any size employer in the state. This state-facilitated auto-IRA program was created to try to address the fact that over 40% of private sector employees don’t have access to a retirement savings plan at work. The new program is free to employers, and is mandatory for businesses with 5 or more employees.
MERIT has set up an easy online enrollment process. Popular payroll systems, such as Quickbooks online and Gusto are fully integrated with MERIT. Maine-based payroll providers are already familiar with the program and will work with their customers. Once enrolled, each employee contributes 5% of their wages into an individually owned Roth IRA. Employees can also change the amount they contribute, or even opt out entirely if they do not want to participate. There are no matching contributions required (or allowed) from the employer, and no fiduciary responsibility on the part of the employer for the IRA funds. From the employer’s point of view – you get to offer a retirement plan to your team, with no cost and very little hassle.
While Maine was one of the first states to launch a program like this – requiring companies to offer retirement plans – 19 other states now have similar programs launched or in the works, and several more have similar legislation pending. Companies with less than 5 employees are exempt, and companies with an existing retirement plan can continue offering that in lieu of the new state-facilitated plan. If you’re inspired to initiate a new plan of your own choosing, instead of offering the MERIT plan, that’s OK too. The goal of the program is to enable more workers to be able to save through work sponsored plans – of any type.
Since workers in the MERIT plan contribute to a Roth IRA, their funds are portable and stay with them from job to job. The account belongs to the individual, not the employer. Since launching earlier this year, the program already counts over 10,000 individual funded accounts from over 1,500 employers – including every type of company from manufacturers to small day care facilities.
I am excited at the value MERIT could provide to small businesses – including startups – who can make use of the program to attract and retain talent that would otherwise be enticed by larger companies. While working at a startup is not for everyone, MERIT helps balance the playing field a little when comparing employee benefits offered by various career paths.
In a sense MERIT itself is a startup as it grew from a concept into a robust program with well over $6 million in assets in a few short months. Granted it’s quite a bit more secure than most startups as it was created by state legislation and the Bank of New York Mellon is the custodian of the deposited funds.
I’m optimistic about the potential benefit MERIT might have for Maine’s startup community, and I’m always happy to talk more about the program with anyone who’s interested. You can also reach out to Beth Bordowitz, MERIT’s Executive Director, who in a previous career had helped establish the progenitor to the Maine Venture Fund!
Details about the program can be found at https://meritsaves.com/.
About Maine Venture Fund
Maine Venture Fund invests in Maine businesses that have the highest potential for growth and impact. For more information, visit maineventurefund.com.
Inquiries:
Terri Wark
Maine Venture Fund
(207) 305-0006
terri@maineventurefund.com
