Amendment #605 to H4000

Secure Choice Retirement Savings

Mr. Donato of Medford moves to amend the bill by adding the following section:

SECTION XXXX. Chapter 29 of the General Laws, as appearing in the 2020 Official Edition, is hereby amended by inserting after Section 64E the following new section:-

Section 64F. (a) Unless the context requires a different meaning or as expressly provided in this section, all terms shall have the same meaning as when used in a comparable context in the Internal Revenue Code. As used in this section the following words and terms shall have the following meanings:-

"Board" means the Massachusetts Secure Choice Savings Board established under this section.

"Department" means the department of revenue.

"Commissioner" means the commissioner of revenue.

"Employee" means any individual who is 18 years of age or older, who is employed by an employer, and who has wages that are allocable to Massachusetts during a calendar year under the provisions of chapter 62.

"Employer" means a person or entity engaged in a business, industry, profession, trade, or other enterprise in Massachusetts, whether for profit or not for profit, that (i) has at no time during the previous calendar year employed fewer than 5 employees in the State, (ii) has been in business at least 2 years, and (iii) has not offered a qualified retirement plan, including, but not limited to, a plan qualified under Section 401(a), Section 401(k), Section 403(a), Section 403(b), Section 408(k), Section 408(p), or Section 457(b) of the Internal Revenue Code of 1986 in the preceding 2 calendar years.

"Enrollee" means any employee or former employee who is enrolled in the Program.

"Fund" means the Massachusetts Secure Choice Savings Program Fund.

"Internal Revenue Code" means Internal Revenue Code of 1986, or any successor law, in effect for the calendar year.

"IRA" means a Roth IRA (individual retirement account) under Section 408A or a traditional IRA under Section 408 of the Internal Revenue Code.

"Participating employer" means an employer that provides a payroll deposit retirement savings arrangement as provided for by this section for its employees who are enrolled in the Program.

"Payroll deposit retirement savings arrangement" means an arrangement by which a participating employer allows enrollees to remit payroll deduction contributions to the Program.

"Program" means the Massachusetts Secure Choice Savings Program.

"Wages" means any compensation within the meaning of Section 219(f)(1) of the Internal Revenue Code that is received by an enrollee from a participating employer during the calendar year.

(b) There is hereby established the Massachusetts Secure Choice Savings Board. The board shall consist of the state treasurer, or their designee, who shall serve as chair; the state comptroller, or their designee; the secretary of the commonwealth, or their designee; one public representative with expertise in retirement savings plan administration or investment, or both, representative of participating employees, appointed by the governor; and one public representative with expertise in retirement savings plan administration or investment, or both, representative of participating employers, appointed by the state treasurer. Each member shall be appointed for a term of 4 years, except the public representative of employers shall be appointed initially for a term of 3 years and all of whom shall be eligible for reappointment. A vacancy in the term of an appointed board member shall be filled for the balance of the unexpired term in the same manner as the original appointment. Members of the board shall serve without compensation but shall be reimbursed for reasonable expenses incurred in the performance of their official duties. The board, the individual members of the board, any other agents appointed or engaged by the board, and all persons serving as program staff shall discharge their duties with respect to the program solely in the interest of the program's enrollees and beneficiaries.

(c)(1) Subject to appropriation, there is hereby established in the office of the state treasurer the Massachusetts Secure Choice Savings Program.  The program shall be developed and administered by the state treasurer with ongoing fiduciary administrative oversight provided by the board for the purpose of promoting greater retirement savings for private-sector employees in a convenient, low-cost, and portable manner.

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(2) The state treasurer shall cause the program to be designed, established and operated in a manner that: (1) accords with best practices for retirement savings vehicles; (2) maximizes participation, savings, and sound investment practices; (3) maximizes simplicity, including ease of administration for participating employers and enrollees; (4) provides an efficient product to enrollees by pooling investment funds; and (5) ensures the portability of benefits.

(3) The state treasurer shall request in writing an opinion or ruling from the appropriate entity with jurisdiction over the federal Employee Retirement Income Security Act regarding the applicability of the federal Employee Retirement Income Security Act to the Program. The state treasurer may not implement the program if the IRA arrangements offered under the program fail to qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the Internal Revenue Code or if it is determined that the program is an employee benefit plan and state or employer liability is established under the federal Employee Retirement Income Security Act.

(4) The state treasurer shall prepare  a written statement of investment policy that includes a risk management and oversight program for consideration and adoption by the board.

(5) The state treasurer may contract with practitioners, administrators, investment managers and other entities in order to design, administer, and provide investment options under the program. The provisions of section 38 of chapter 29 of the general laws shall not apply to any investment of the fund. Any practitioner, administrator, investment manager or other entities with which the state treasurer contracts shall comply with any and all applicable federal and state laws, rules, and regulations, as well as any and all rules, policies, and guidelines promulgated by the board with respect to the program and the investment of the fund, including, but not limited to, the investment policy. Any practitioner, administrator, investment manager or other entity with which the state treasurer contracts shall provide such reports as the board deems necessary to assess performance.

(6) The board shall assess the feasibility of multistate or regional agreements to administer the program through shared administrative and operational resources and may enter into those agreements if deemed beneficial to the program.

(7) The board shall report annually to the state treasurer, governor, comptroller, secretary of the commonwealth, and the house and senate committees on ways and means. Such report shall include, but shall not be limited to: an audited financial report, prepared in accordance with generally accepted accounting principles, a summary of the benefits provided by the program, including the number of enrollees, and the percentage and amounts of investment options and rates of return

(8) All agencies of the commonwealth shall cooperate as requested by the board in the performance of their duties under this section, including, unless otherwise prohibited, the sharing of relevant data as the parties shall mutually agree.

(d) There is hereby established in the office of the state treasurer The Massachusetts Secure Choice Savings Fund, which shall consist of money from the payment of fees, penalties, and other payments due to the program. The treasurer may accept private contributions, publicly or privately-funded grants and funds appropriated by the federal, state, or local governments. The fund shall cover all expenses associated with the administration of the program not otherwise covered by the program.  The state treasurer shall credit all interest and income derived from the deposit and investment of money in the fund to the fund. Monies in the fund that are unexpended at the end of the fiscal year shall not revert to the General Fund and shall be available for expenditure in the subsequent fiscal year. The board shall establish guidelines regarding administration of the fund.

(e)(1) Each employer shall establish a payroll deposit retirement savings arrangement to allow each employee to participate in the program on a timeline set by the board.

(2) Employers shall automatically enroll in the program each of their employees who has not opted out of participation in the program and shall provide payroll deduction retirement savings arrangements and deposit, on behalf of such employees, these funds into the program.

(3) Enrollees shall have the ability to select a contribution level into the fund. This level may be expressed 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. Enrollees may change their contribution level at any time and that election will generally be honored as soon as administratively feasible. If an enrollee fails to select a contribution level using the form prescribed, then he or she shall contribute the default contribution rate of 6 percent with an annual escalation of 1 percent up to 10 percent of their wages to the program.

(4) Enrollees may select an investment option from the permitted investment options available under the program. Enrollees may change their investment option at any time. In the event that an enrollee fails to select an investment option, that enrollee shall be placed in a qualified default investment alternative specified by the program.

(5) Employers shall retain the option at all times to set up any type of employer-sponsored retirement plan, such as a defined benefit plan or a 401(k), Simplified Employee Pension (SEP) plan, or Savings Incentive Match Plan for Employees (SIMPLE) plan, instead of having a payroll deposit retirement savings arrangement to allow employee participation in the program.

(6) An enrollee may terminate their participation in the program at any time in a manner prescribed by the  program.

(f)(1) The commonwealth, the board, each member of the board or other commonwealth official, other commonwealth boards, commissions, or agencies, any member, officer, or employee thereof, and the program: (i) shall have no responsibility for compliance by individuals with the conditions and other provisions of the Internal Revenue Code that determine which individuals are eligible to make tax-favored contributions to IRAs, in what amount, and in what time frame and manner; (ii) shall have no duty, responsibility, or liability to any party for the payment of any benefits under the program, regardless of whether sufficient funds are available under the program to pay such benefits; (iii) do not and shall not guarantee any interest rate or other rate of return on or investment performance of any contribution or account balance; and (iv) are not and shall not be liable or responsible for any loss, deficiency, failure to realize any gain, or any other adverse consequences, including without limitation any adverse tax consequences or loss of favorable tax treatment, public assistance or other benefits, incurred by any person as a result of participating in the program.

(2) The debts, contracts, and obligations of the program are not the debts, contracts, and obligations of the commonwealth, and neither the faith and credit nor the taxing power of the commonwealth is pledged directly or indirectly to the payment of the debts, contracts, and obligations of the program.

(3) Participating employers shall not have any liability for an employee's decision to participate in, or opt out of, the program or for the investment decisions of the board or of any enrollee.

(4) A participating employer shall not be a fiduciary, or considered to be a fiduciary, over the program. A participating employer shall not bear responsibility for the administration, investment options, or investment performance of the program. A participating employer shall not be liable with regard to investment returns, program design, and benefits paid to program participants.

SECTION 7. Section 64F of chapter 29 of the General Laws is hereby amended by inserting at the end thereof the following subsection:-

(g)(1) Upon implementation of the program, the board shall provide written confirmation to the department. Upon such notice, the department shall immediately make publicly available a notice informing employers of the requirements of this section. Such notice shall inform employers that rather than enrolling employees in the program, employers may sponsor an alternative plan, including, but not limited to, a defined benefit plan, 401(k) plan, a Simplified Employee Pension (SEP) plan, or a Savings Incentive Match Plan for Employees (SIMPLE) plan.

(2) One calendar year from the date of notice provided in subparagraph (1) of this subsection an employer who fails without reasonable cause to enroll an employee in the program within the time prescribed under this section shall be subject to a penalty equal to:

(i) $250 for each employee for each calendar year or portion of a calendar year during which the employee neither was enrolled in the program nor had elected out of participation in the program; and the employee or any appropriate official of the commonwealth may bring a civil action to require the employer to enroll the employee and shall recover such costs and reasonable attorney’s fees as may be allowed by the court; and

(ii) for each calendar year beginning after the date a penalty has been assessed with respect to an employee, $500 for any portion of that calendar year during which such employee continues to be unenrolled without electing out of participation in the program.

(3) No penalty shall be imposed under subparagraph (2) of this subsection for any failure for which it is established that the employer subject to liability for the penalty did not know that the failure existed and exercised reasonable diligence to meet the requirements of this section.

(4) No penalty shall be imposed under subparagraph (2) of this subsection for any failure where:

(i) the employer subject to liability for the penalty exercised reasonable diligence to meet those requirements; and

(ii) the employer complies with those requirements with respect to each employee by the end of the 90-day period beginning on the first date the employer knew, or exercising reasonable diligence would have known, that the failure existed.

(5) In the case of a failure that is due to reasonable cause and not to willful neglect, all or part of the penalty may be waived to the extent that the payment of the penalty would be excessive or otherwise inequitable relative to the failure involved.

(6) If a participating employer fails to transmit a payroll deduction contribution to the program on the earliest date the amount withheld from the enrollee’s compensation can reasonably be segregated from the participating employer’s assets, but not later than the 15th day of the month following the month in which the enrollee’s contribution amounts are withheld from their paycheck, the failure to remit such contributions on a timely basis shall be subject to the same sanctions as employer misappropriation of employee wage withholdings and to the penalties specified in subparagraph (2) of this subsection.

(7) Except as provided in this subsection, all information received by the department from returns filed by an employer or from any investigation conducted under the provisions of this section shall be confidential, except for official purposes within the department or pursuant to official procedures for collection of penalties assessed under this section. Nothing contained in this section shall prevent the commissioner from publishing or making available to the public reasonable statistics concerning the operation of this section wherein the contents of returns are grouped into aggregates in such a way that the specific information of any employer shall not be disclosed. Nothing contained in this section shall prevent the commissioner from divulging information to an authorized representative of the employer or to any person pursuant to a request or authorization made by the employer or by an authorized representative of the employer.

(8) Civil penalties collected under this section and fees collected pursuant to subparagraph (2) of this subsection shall be deposited into the general fund established in section 2 of chapter 29.

(9) The department may promulgate rules and regulations as necessary or proper for the administration and enforcement of this subsection.

Additional co-sponsor(s) added to Amendment #605 to H4000

Secure Choice Retirement Savings