Hearing Set on Prospective Bay State Secure Choice Savings Program

A hearing has been set concerning legislation that would make Massachusetts the next state to institute a state-run retirement program that would provide coverage for private-sector employees whose employers do not. 

The Joint Committee on Financial Services of the Massachusetts legislature will hold a hearing on H.998 and its companion, S.624 on Oct. 24 from 10:00 AM to 1:00 PM in room A-2; it also will be accessible virtually. H.998 had been referred to the committee on Feb. 16, 2023, the day it was introduced. 

Rep. Paul Donato (D-Medford) introduced H 998, An Act to Encourage Retirement Planning; Sen. Sal. N. DiDomenico (D-Middlesex and Suffolk) introduced S.624, the Senate counterpart, the same day the House version was. This is not the first time that Donato and DiDomenico introduced legislation to create Massachusetts Secure Choice; they also did so early in 2021, but those bills were not enacted. 

About the Legislation

H.998 and S.624 would establish the Massachusetts Secure Choice Savings Program, an automatic enrollment payroll deduction IRA program. 

Employers. Employers with more than 25 employees would be required to automatically enroll employees who had not opted out. Small employers—those with fewer than 25 employees—could, but would not be required to, provide payroll deduction retirement savings arrangements for each employee who elects to participate in the Program.

Employees. Those who enroll would be able to select an investment option from a set of permitted investment options. They also would be able to select a contribution level into the fund as a percentage of wages or as a dollar amount up to the deductible amount for the enrollee's taxable year under Section 219(b)(1)(A) of the Internal Revenue Code. They further could change their contribution level at any time. And employees may stop participating in the program at any time.

Massachusetts Secure Choice Savings Board. The legislation would create the Massachusetts Secure Choice Savings Board to administer the program.

The members of the board would be: 

• the state Treasurer, or his or her designee, who would 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 duties of the board would be: 

• Design, establish and operated the plan.
• Appoint a trustee to the IRA fund.
• Explore and establish investment options.
• Establish the process by which interest, investment earnings, and investment losses are allocated to individual program accounts on a pro rata basis and are computed at the interest rate on the balance of an individual's account.
• Make and enter into contracts necessary for the administration of the program and fund.
• Review the performance of any investment vendors every four years.
• Determine the number and duties of staff members needed to administer the program.
• Cause money in the fund to be held and invested as pooled investments.
• Evaluate and establish the process by which an enrollee is able to contribute a portion of his or her wages to the program for automatic deposit of those contributions and the process by which the participating employer provides a payroll deposit retirement savings arrangement to forward those contributions and related information to the program.
• Design and establish the process for enrollment and by which an employee can opt not to participate, select a contribution level, select an investment option, and terminate participation.
• Evaluate and establish the process by which an individual may voluntarily enroll in and make contributions to the Program.
• Accept grants, appropriations, or other money from the Commonwealth, any unit of federal, State, or local government, or any other person, firm, partnership, or corporation solely for deposit into the fund.
• Evaluate the need for, and procure as needed, insurance against any and all loss in connection with the property, assets, or activities of the program.
• Make provisions for the payment of administrative costs and expenses for the creation, management, and operation of the program.
• Allocate administrative fees to IRAs in the program on a pro rata basis.
• Set minimum and maximum contribution levels in accordance with limits established for IRAs by the Internal Revenue Code.
• Facilitate education and outreach to employers and employees.
• Facilitate compliance by the program with all applicable requirements under the Internal Revenue Code.
• Carry out the duties and obligations of the program in an effective, efficient, and low-cost manner.
• Deposit into the Massachusetts Secure Choice Administrative Fund all grants, gifts, donations, fees, and earnings from investments from the Massachusetts Secure Choice Savings Program Fund that are used to recover administrative costs.

Timing. The legislation calls for the program to be implemented, and enrollment of employees to begin, within 24 months after the effective date after enactment of this measure. 

The legislation as currently drafted provides that employers would be required to establish a payroll deposit retirement savings arrangement to allow each employee to participate in the program at most nine months after the program is open for enrollment.