Retirement is mandatory!

In Maine, offering a retirement plan to employees is now required by law.
In June 2021, the Maine State Legislature signed “An Act to Promote Individual Retirement Savings through a Public-Private Partnership” (LD 1622) into law. This bill requires qualifying employers (25 employees or more) to provide a Roth IRA to all employees via automatic enrollment with the opportunity to opt out. The implementation begins in April of 2023.
Maine is not the first state — and likely not the last — to create and pass such a bill. As a small state with more than 230,000 people who are employed without access to a retirement plan, the idea to provide something to all certainly isn’t original. For most people who will retire in ten to fifteen years from now (or more), this retirement plan will likely provide the bulk of their retirement income (66%-80%). It is something we need to address, and LD 1622 is a first step.
In Maine, more than 33% of all people over the age of 65 live on a single source of income — Social Security. With pensions slowly dwindling, and the average Social Security check being around $1,544 month, it is necessary to have people save for their own retirement.
The design of the bill allows for employers to automatically deduct (for those employees who want to participate) a certain percentage of their pay, automatically increase that percentage each year by 1% up to 8% of pay, invest in target date funds, limited alternatives, and capital preservation funds, includes self-employed people, and allows a 401(k) or other plans qualified under sections 401(a), 403(a), 403(b), 408(k), 408(p), or 457(b) of the IRS code to satisfy the mandate. If an employer does not participate under the requirement, the penalty can range anywhere from $10 to $50 per person.
In all, this is one way to bring light to the importance of saving for retirement. If you have questions about the bill or how your company can proactively approach your offering to employees, JMA has experts on staff who can guide your company.
Here is what I promise: As goes Maine, so goes the nation.
See you all next month.
Jac Arbour, CFP, ChFC

— Jac Arbour is the founder and CEO of J.M. Arbour and leads a team of fiduciaries who specialize in comprehensive financial planning and fee-based investment advisory services. The team can be reached at 207-248-6767.

Investment advisory services are offered through J.M. Arbour, LLC, an SEC registered investment adviser.