IRA Provider Insights

State-Run Retirement: A Look at Massachusetts' Retirement Program

Posted by Dana Sheehan on Oct 12, 2016 11:32:39 AM

Our study of state-run retirement programs continues as we look at Massachusetts, the Bay State. This is the third post in this series. Read about California’s program and Illinois’ program, as well as an overview of state-run retirement programs.

Implementation Status

Massachusetts passed the bill H 3754 into law on March 22, 2012, to provide retirement options for nonprofit organizations. The program was approved by the IRS in June 2014 and the Massachusetts Treasurer’s Office plans to implement the program after the IRS approves the group trust that will pool investment resources.

In January 2015, bill H 939 and H 924 were introduced to create the Massachusetts Secure Choice Savings Program, modeled after the Illinois Secure Choice Saving Program. The bills haven’t moved forward since their introduction. H 939 is expected to be implemented within 24 months of passing if funding is available and the program must be self-sustaining.

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Plan Overview

Bill H 3754 covers nonprofit organizations with 20 or fewer employees. Participation is voluntary and the employee contribution rate is 6% by default, but can start at 4% and go up to 10%.

Because this plan only includes nonprofit organizations, many private-sector employees who work for smaller businesses are left without a retirement plan. According to AARP, this includes 1,250,000 Massachusetts citizens. Read more about this in AARP Fact Sheet Workplace Retirement Plans Will Help Workers Build Economic Security.

Bills H 939 and H 924 will create a retirement program for private sector workers who work for employers that do not already provide a retirement program. Like H 3754, the investment pool will be managed by the Massachusetts Treasurer.

In bill H 939, businesses must have been in operation for at least two years and have 25 or more employees in order to participate. Employees will be automatically enrolled in the Security Choice Saving Program and have an option of contribution level, with 3% as the default.

The purpose of bill H 924 is to create a Secure Choice Retirement Savings Board to administer the Secure Choice Retirement Saving Trusts, consisting of the Secure Choice Multiple-Employee Retirement Trust (MERP) and the Secure Choice Individual Retirement Account Trust (IRAP). In this plan, employers with 10 or more employees are required to participate if they do not already provide a retirement plan. The self-employed and business with fewer than 10 employees may choose to participate. Contributions will be 3% unless either the employer or employee choose otherwise.



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Topics: state-run retirement, Payroll IRAs

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