Chapter 29 of the Massachusetts General Laws is hereby amended by inserting at the end the following new section:
Section 1. Definitions
For purposes of this section, the following definitions shall apply:
a. “Board” means the Secure Choice Retirement Savings Board.
b. “Eligible employee” means a person who is employed by an eligible employer and who for any calendar year has provided (or is expected to provide) 750 or more hours of service to the eligible employer, with eligibility continuing even if service in later years is less than 750 hours.
c. “Eligible employee” does not include:
i. Any employee who is an “active participant” as described in Sec. 219(g)(5) of Title 26 of the United States Code or in an automatic enrollment payroll deduction IRA maintained or offered by the employee’s employer.
ii. Any employee covered by a collective bargaining agreement that expressly provides for the employer to contribute to a multiemployer pension plan described in Sec. 414(f) of Title 26 of the United States Code.
iii. Any employee who has not attained the age of 18 before the beginning of the calendar year.
d. “Eligible employer” means a person or entity engaged in a specific business, industry, profession, trade, or other enterprise in the Commonwealth, whether for profit or not for profit, that has ten or more employees, excluding the federal government, the Commonwealth, any county, any municipality, or any of the Commonwealth’s units or instrumentalities, with the exception that the Commonwealth is deemed an eligible employer with regard to Personal Care Attendants, Family Child Care Providers, and other direct or indirect employees of the Commonwealth who are not eligible to participate in a public employee pension fund within the Commonwealth.
e. “Eligible employer” does not include any employer that has not been in business at all times during the calendar year and the preceding calendar year.
f. “Participating employee” means an eligible employee who makes contributions into the Secure Choice Retirement Savings Plan.
g. “Participating employer” means an eligible employer that provides a payroll deposit retirement savings arrangement provided for by this title for eligible employees.
h. “Payroll deposit retirement savings arrangement” means an arrangement by which an employer makes contributions on behalf of participating employees by remitting a specified portion of the employee’s pay to the Secure Choice Retirement Savings Plan at the same time and manner as payroll deductions.
i. “Plan” means the Secure Choice Retirement Savings Plan, which includes both the Secure Choice Multiple-Employer Retirement Plan (“MERP”) and the Secure Choice Individual Retirement Account Plan (“IRAP”).
j. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq.
k. “Code” or “IRC” means the Internal Revenue Code of 1986, as amended 26 U.S.C. §§ 1 et seq.
l. “PRIM Board” means the Massachusetts Pension Reserves Investment Management Board.
Section 2. Responsibilities of Eligible Employers
An eligible employer satisfies its obligations to its eligible employees under this Act by doing any one of the following:
a. Establishing an employer-sponsored retirement plan, such as a single-employer defined benefit plan or a 401(k), Simplified Employee Pension (SEP) plan, or Savings Incentive Match Plan for Employees (SIMPLE) plan, or to offer an automatic enrollment payroll deduction IRA, or becoming a contributing employer to a multiemployer pension plan described in Sec. 414(f) of Title 26 of the United States Code;
b. Becoming a participating employer in the Secure Choice Multiple-Employer Retirement Plan (“MERP”) described in Section 3(a) below; or
c. Automatically enrolling eligible employees in the Secure Choice Individual Retirement Account Plan (“IRAP”), as described in Section 3(b) below.
Section 3 Trusts
There are hereby established two retirement savings trust funds known collectively as the Secure Choice Retirement Savings Trusts (“trusts”) to be administered by the Board for the purpose of promoting greater retirement savings for Commonwealth employers and employees in a convenient, voluntary, low-cost, and portable manner. The two trust funds are established as follows:
a. The Secure Choice Multiple-Employer Retirement Trust will be established as a profit sharing defined contribution (individual account) plan within the meaning of Sections 401(a)(27) and 414(i) of the Code and will be qualified under Section 401(a) of the Code.
b. The Secure Choice Individual Retirement Account Trust will be established to accept individual contributions through payroll deduction and direct payment into individual retirement accounts established under Sections 408(a) and/or 408(b) of the Code.
Section 4 Composition of the Board
a. There is hereby created within the government of the Commonwealth the Secure Choice Retirement Savings Board, which shall initially consist of seven members, with the Treasurer serving as chair, as follows:
i. The Treasurer, or his or her designee.
ii. The Secretary of Administration and Finance, or his or her designee.
iii. An individual with retirement savings or investment expertise appointed by the Senate President
iv. A small business representative appointed by the Governor.
v. Two public members appointed by the Treasurer.
vi. An employee representative appointed by the Speaker of the House.
b. Within one year of the date the Board opens the Secure Choice Retirement Savings Plan for participation, the Treasurer will remain as Board member and will conduct elections to elect Representative Board members to represent the interests of participating employers and employees. The Treasurer will conduct an election among participating employees to elect four of their number to be Representative Board members to represent the interests of participating employees. The Treasurer will also conduct an election among participating employers in the Secure Choice Multiple-Employer Retirement Plan (“MERP”) to elect four of their number to be Representative Board members from among themselves to represent the interests of participating employers. These additional Board members shall be designated as Representative Board members, and must continue to participate in the Plan in order to serve on the Board. If any such Representative Board member ceases to participate in the Plan, his or her eligibility to continue as a Representative Board member shall cease as well, and the Board shall make arrangements to hold an election to elect a replacement. The terms of Representative Board members shall be for three years.
Section 5 Fiduciary Duty
The Board and the Plan administrator and staff shall act as fiduciaries under ERISA with regard to the Secure Choice Multiple-Employer Retirement Trust, and discharge their duties with respect to both trusts solely in the interest of the Plan participants as follows:
a. For the exclusive purposes of providing benefits to Plan participants and defraying reasonable expenses of administering the Plan.
b. By investing with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with those matters would use in the conduct of an enterprise of a like character and with like aims.
c. Any contributions paid by employees and employers into the Secure Choice Multiple-Employer Retirement Trust shall be used exclusively for the purpose of paying benefits to the participants of the Secure Choice Multiple-Employer Retirement Plan, for the cost of administering the MERP, and for investments made for the benefit of the MERP.
d. Any contributions paid by employees into the Secure Choice Individual Retirement Account Trust shall be used exclusively for the purpose of paying benefits to the participants of the Secure Choice Individual Retirement Account Plan, for the cost of administering the IRAP, and for investments made for the benefit of the IRAP.
Section 6 Risk Management
The Board shall annually prepare and adopt a written statement of investment policy that includes a risk management and oversight program. The investment policy or policies shall mitigate risk by maintaining a balanced investment portfolio that provides assurance that no single investment or class of investments will have a disproportionate impact on the total portfolio. The policy or policies shall also address hedging against longevity risk through the purchase of annuities or other longevity hedging products. The risk management and oversight program shall be designed to ensure that an effective risk management system is in place to monitor the risk levels of the Secure Choice Retirement Savings Plan investment portfolios and ensure that the risks taken are prudent and properly managed.
Section 7 Investments
Moneys in the trusts may 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.
Section 8 Benefit Amount
Interest, earnings and/or losses shall be allocated to program accounts as prescribed by the Board. An individual’s retirement savings benefit under the program shall be an amount equal to the balance in the individual’s program account on the date the retirement savings benefit becomes payable. The Commonwealth shall have no liability for the payment of any benefit to any participant in the program.
Section 9 Benefit Form
Benefits under the Secure Choice MERP will be paid by converting a participating employee’s account balance to a lifetime annuity. Participating employees with accounts in both the MERP and the IRAP have the option of adding all or any part of their IRAP account balance to their MERP account balance prior to converting their MERP balance to a lifetime annuity. For married participants, the automatic form of MERP benefit payment will be a joint and survivor annuity. A MERP participant will have, upon retirement, the option to receive up to $20,000 of his or her account balance (but no more than 50 percent of the account balance, in any event) in the form of a lump sum payment. A married participant’s election of this optional form is subject to the spousal waiver requirements of ERISA section 205. This $20,000 balance may be increased by the Board.
Section 10 Board Duties
The Board shall have the power and authority to do all of the following:
a. Establish one or more payroll deposit retirement savings arrangements for use by participating employers.
b. Employ staff and/or appoint a Plan administrator, and determine the duties of the Plan administer and other staff as necessary and set their compensation.
c. Make provisions for the payment of costs of administration and operation of the trusts.
d. Evaluate and establish the process by which an eligible employee may contribute a portion of his or her salary or wages to the Plan for automatic deposit of those contributions. This may include, but is not limited to, existing processes and arrangements used for the deposit and administration of tax required to be deducted and withheld relating to the collection of income tax at source on wages or for the deposit of tax required to be paid under the unemployment insurance system. This also may include, but is not limited to, financial services companies and third-party administrators with the capability to receive and process employee information and contributions for payroll deposit retirement savings arrangements or other arrangements authorized by this title.
e. Evaluate and establish the process by which a participating employer is able to make contributions for the benefit of its employees to the Secure Choice Multiple-Employer Retirement Trust.
f. Design and establish the process for the enrollment of Plan participants.
g. Procure insurance in connection with the property, assets, or activities of the trust, including private underwriting and/or reinsurance, to manage risk and insure the retirement savings rate of return.
h. Procure insurance indemnifying each member of the Board from personal loss or liability resulting from a member’s action or inaction as a member of the Board, to the extent permitted by ERISA and other governing law.
i. Set default, minimum and maximum contribution levels as well as auto-escalation policies whereby participating employees’ contributions automatically escalate from year to year until they reach a maximum contribution rate unless the employee changes his or her contribution rate. Participants will be immediately vested in their account balances.
j. Accept contributions from participating employers for the benefit of their employees. These contributions shall be in cash or cash equivalents only; securities shall not be accepted as contributions.
k. Design and establish the process for the enrollment of those self-employed individuals and employers who do not qualify as eligible employers who choose to voluntarily participate in the Plan.
l. Arrange for collective, common, and pooled investment of assets of the Plan, including investments in conjunction with other funds with which those assets are permitted to be collectively invested, with a view to saving costs through efficiencies and economies of scale.
m. Allocate administrative fees to each participating employee’s account balance on a pro rata basis, or such other basis as the Board determines to be fair and equitable. The Board shall keep annual administrative expenses as low as possible, but in no event shall they exceed one percent of the total trust balance.
n. Explore and establish investment options that offer employees ways to secure retirement income without incurring debt or liabilities to the state.
o. Exercise discretionary authority with regard to:
i. If necessary, making determinations of the eligibility of an employer, employee, or other individual to participate in the Plan;
ii. Making factual determinations regarding the Plan;
iii. Interpreting the Plan’s governing documents; and
iv. Such other matters as are necessary for the administration of the Plan.
p. The Board shall take all such actions required or advisable to ensure that the MERP is treated as a single plan for purposes of ERISA.
q. The Board shall publish an annual audited financial report, prepared in accordance with generally accepted accounting principles, on the operations of the Secure Choice Retirement Savings Plan. The annual audit shall be made by an independent certified public accountant and shall include, but not be limited to, direct and indirect costs attributable to the use of outside consultants, independent contractors, and any other persons who are not state employees.
r. The Board shall ensure that all reports required under the Code and ERISA are properly filed for the Plan.
Section 11 Employee Information Packet
Prior to opening the Secure Choice Retirement Savings Plan for enrollment, the Board shall design and disseminate to employers an employee information packet. The packet shall include background information on the Plan and appropriate disclosures for employees.
Section 12 Disclosure Form
The disclosure form shall include, but not be limited to, all of the following:
a. The benefits and risks associated with participating in the Plan.
b. The mechanics of how to join the Plan.
c. How to opt out of the Plan.
d. The process for applying for payment of retirement benefits.
e. How to obtain additional information on the Plan.
In addition, the disclosure form shall clearly articulate the following:
a. That employers are not liable for decisions employees make pursuant to this bill.
b. The Plan fund is not guaranteed by the Commonwealth.
Section 13 Enrollment
After the Board opens the Secure Choice Retirement Savings Plan for enrollment:
a. Any employer may choose to have a payroll deposit retirement savings arrangement to allow any eligible employee to participate in the Plan.
b. Beginning three months after the Board opens the Plan for enrollment, each eligible employer with more than 100 eligible employees shall have a payroll deposit retirement savings arrangement to allow each eligible employee to participate in the program.
c. Beginning six months after the Board opens the Plan for enrollment, each eligible employer with more than 50 eligible employees shall have a payroll deposit retirement savings arrangement to allow each eligible employee to participate in the Plan.
d. Beginning nine months after the Board opens the Plan for enrollment, all eligible employers shall have a payroll deposit retirement savings arrangement to allow each eligible employee to participate in the Plan.
e. Employers must announce the availability of the Plan to each eligible employee 2 weeks in advance of establishing employee eligibility, or, for employees hired after the employer establishes eligibility, prior to their date of hire. Each eligible employee shall be enrolled in the Plan unless the employee elects not to participate in the Plan.
f. Employers shall retain the option at all times to set up any type of employer-sponsored retirement plan, such as a single-employer defined benefit plan or a 401(k), Simplified Employee Pension (SEP) plan, or Savings Incentive Match Plan for Employees (SIMPLE) plan, or to offer an automatic enrollment payroll deduction IRA, in lieu of having a payroll deposit retirement savings arrangement to allow employee participation in the Secure Choice Retirement Savings Plan.
g. Unless otherwise specified by the employer or directed by the employee, a participating employer shall contribute 3 percent of the employee’s annual salary or wages to the Plan.
h. By regulation, the Board may adjust the contribution amount set in subdivision (h) to no less than 2 percent and no more than 5 percent and may vary that amount within that according to the length of time the employee has contributed to the program.
Section 14 Payments
Employer contributions made through payroll deduction shall be paid by the employer to the Secure Choice Retirement Savings Trusts in the manner and according to the schedule specified and established by the Board.
Section 15 Enforcement
The Massachusetts Attorney General shall have the power to enforce the provisions of this Act.
a. The Attorney General may impose, after due process, penalties against eligible employers for failure to comply with provisions (b), (c) and (d) of Section 12 of up to $250 per employee. Proceeds of such penalties, after deducting enforcement expenses, shall be deposited for the benefit of the Trust.
b. The Attorney General shall impose, after due process, penalties against employers equal to lost earnings and interest on contributions made later than the deadlines prescribed in Section 13. The Attorney General shall prescribe a methodology for calculating such lost earnings and interest. Proceeds of such penalties shall be deposited for the benefit of the Trust and credited to the accounts of the affected employee(s) on a pro rata basis.
Section 16 Liability
Employers shall not have any liability for an employee’s decision to participate in, or opt out of, the Secure Choice Retirement Savings Plan.
Section 17 Fiduciary
Participating employers shall not be a fiduciary, or considered to be a fiduciary, over the Secure Choice Retirement Savings Trust or the Plan, except with respect to contribution amounts not remitted in a timely fashion. Participating employers shall not bear responsibility for the administration, investment, or investment performance of the Plan. Such employers shall not be liable with regard to investment returns, Plan design, and benefits paid to Plan participants.
Section 18 Savings Clause
The provisions of this Act are severable. In the event that portions of this Act are declared invalid or unenforceable, the remaining terms and provisions that are not affected thereby shall remain in force and effect.
The effective date of this act shall be January 1, 2017.
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