Massachusetts Secure Choice Moves Closer to Implementation

BY John Iekel
September 12, 2022 - AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES

Legislation that would create Massachusetts Secure Choice, a state-run retirement program that would provide coverage for private-sector employees whose employers do not offer a retirement plan, is now before the Rules Committees of both chambers of the Bay State’s legislature.

The legislation was introduced in the state Senate and House of Representatives early in 2021.

Rep. Paul Donato (D-Middlesex) had introduced H. 1067 on Feb. 18, 2021. The measure calls for the establishment of the Massachusetts Secure Choice Savings Program.

Sen. Sal DiDomenico (D-Middlesex) introduced S. 653 on Jan. 26, 2021 and Rep. Meghan Kilcoyne (D-Worcester) introduced H. 1138 on Feb. 19, 2021. Those bills would provide further details about the program and its administration.

The Joint Committee on Financial Services reported the Senate bill to that chamber’s Rules Committee on Feb. 17, 2022; the House Committee on Financial Services reported H. 1067 and H. 1138 to that chamber’s Rules Committee on Sept. 1, 2022.

About the Program

The legislation would create a retirement savings program that would be in the form of an automatic enrollment payroll deduction IRA.

Accounts. The program would feature an IRAP, or IRA Program, and a MERP, or Multiple-Employer Retirement Plan.

The IRAP would:

• Allow eligible individuals employed for compensation in the state to contribute to an - individual account established under the program through payroll deduction.
• Provide for automatic enrollment of employees, but allow employees to opt out of the plan.
• Have a default contribution rate set by the Board by rule.
• Offer default escalation and contribution levels that can be increased or decreased within the limits allowed by the IRC.
• Pool accounts established under the plan for investment purposes.
• Be professionally managed.
• Allow the use of private sector partnerships to administer and invest the・contributions to the plan under the supervision and guidance of the Board.
• Be invested or reinvested by the Treasurer - or may be invested in whole or in part under・contract with the PRIM Board or private money managers, or both, as determined by the Board.
• Provide for the program’s administration “in an efficient and cost-effective manner”.
• Be structured so that it is not governed by ERISA.

The MERP would:

• Be qualified under Internal Revenue Code Section 401(a).
• Be a profit-sharing plan as described in Internal Revenue Code Section 401(a)(27)(B).。e a defined contribution plan as described in Internal Revenue Code Section 414(i)
• Be governed by ERISA.
• Be a multiple employer plan permitting the voluntary participation of employers with employees working in the Commonwealth.
• Permit employee contributions, as provided for in IRC Section 401(k), through payroll deductions.
• Allow for employer contributions as matching contributions, fixed contributions, or a combination of the two.

Employers. Each eligible employer would be required to automatically enroll its eligible employees in the IRAP. However, an eligible employer is exempted to the extent that it offers each of its eligible employees the opportunity to participate in a qualified plan or a payroll deduction IRA.

Massachusetts Secure Choice Savings Board. The legislation would create the Massachusetts Secure Choice Savings Board, which would administer the program. It would have seven members:

• the State Treasurer, or his or her designee, who shall serve as chair;
• the State Comptroller, or his or her designee;
• the Secretary of the Commonwealth, or his or her designee;
• two public representatives with expertise in retirement savings plan administration or investment, or both, appointed by the Governor;
• a representative of participating employers, appointed by the Governor; and
• a representative of enrollees, appointed by the Secretary of the Commonwealth.

The legislation would designate the Board as the named fiduciary under ERISA and provide that the Board may delegate fiduciary authority. The legislation also would designate the Board as the plan sponsor and administrator under・RISA Section (3)(16).

The Board also would be required to annually prepare and adopt a written statement of investment policy that includes a risk management and oversight program, and to design and・disseminate to employers an employee information packet that would include background information on the programs and disclosures for employees.

Massachusetts Secure Choice Savings Program Fund. The legislation would create the Massachusetts Secure Choice Savings Program Fund, which would include enrollees’ IRAs, and be accounted for as individual accounts. Money in the fund would include that received from enrollees and participating employers through automatic payroll deductions and contributions to savings made under the law establishing the program. The Board would determine how the fund would operate.