The Maryland Small Business Retirement Savings Program, Hunt Valley, is looking for a program administrator and an investment manager for its MarylandSaves program.
Maryland has an estimated 1.2 million private sector workers without access to a payroll-deduction retirement program. The private sector, auto-IRA program created by Maryland requires employers not offering retirement savings options to enroll employees in the program, with a filing credit for employers, but no penalty.
The program is projected to have $10 billion in accounts and 400,000 participants within a decade.
The initial contribution rate is 5% of pay, and participants can elect lower or higher rates, or opt out. Default contributions will automatically escalate 1% annually to a maximum of 10%.
Proposals can bid for both administrative and investment services, and can include asset-based fees, dollar-based fees or a combination, as well as separate fees for specific services such as retirement preparation advice.
A distinguishing feature of Maryland's approach is to focus on both the accumulation and decumulation phases, offering participants nearing retirement age a way to maximize Social Security benefits, Marketing Director Glenn Simmons said in an interview. Proposals should offer suggestions on how to structure both a default managed payout option and an optional accelerated payment option for workers nearing retirement age. The latter "Social Security bridge" option would give participants the choice of accelerated payments to allow them to delay filing for Social Security benefits.
The program is required to offer multiple investment options and is designed to ultimately be paid for from fees on invested accounts, not taxpayer funds. The enabling legislation called for a 0.5% cap on administrative fees, but it does not apply until the program has a sustainable amount of assets under management. The cap also does not apply to additional participant services such as investment education, financial planning or investment management services.
Proposals must include a breakpoint schedule reflecting the higher platform and marketing expenses expected in the initial years and economies of scale as assets grow over time, including when the 0.5% fee cap on administrative expenses would apply.
Proposals are due by April 17 at 2 p.m. EDT. Program officials hope to award contracts by the end of June and start testing by the end of the year.
The RFP is available on the MarylandSaves website.