TIAA endorses Maryland's House Bill 605 promoting automatic retirement contributions

The Maryland General Assembly's Appropriations Committee convened on March 11, 2025, to discuss House Bill 605, which aims to enhance retirement savings for state employees through automatic enrollment in 401(k) plans. The meeting highlighted the financial benefits of automatic retirement contributions, emphasizing how they can reduce taxable income and provide immediate tax relief for employees.

During the session, advocates pointed out that contributions made to a 401(k) plan are deducted from an employee's pretax income, effectively lowering their taxable income. For instance, an employee earning $35,000 who contributes 6% of their salary, or $2,100, would see their taxable income decrease to $32,900. This reduction means they would owe less in taxes, allowing them to take home more money. The potential for tax-deferred growth of these contributions was also noted as a significant advantage for long-term retirement savings.

Josh Freeley, regional vice president for state government relations at TIAA, emphasized the importance of automatic enrollment in increasing participation rates in retirement plans. He explained that automatic enrollment removes barriers such as procrastination and lack of knowledge, which often prevent employees from signing up for retirement savings. Freeley cited studies indicating that nearly half of new hires who are automatically enrolled participate in workplace retirement plans, showcasing the effectiveness of this approach.

The committee expressed gratitude to the treasurer for their persistence on this issue, recognizing the importance of supporting state employees in achieving financial security. The discussions concluded with a call for a favorable report on House Bill 605, which aims to facilitate easier access to retirement savings for Maryland's workforce. The bill represents a significant step towards improving financial well-being for state employees and ensuring they are better prepared for retirement.