Massachusetts legislature approves automatic IRA for small businesses
The Massachusetts legislature has passed a budgetary bill that would establish the Massachusetts Secure Choice Savings Program, creating an automatic enrollment payroll deduction IRA.
Under H.4240, employers with 25 or more employees who don’t offer a retirement plan will enroll their workers who haven’t opted out. It will be designed, established, and operated by the Treasurer’s Office.
The new law requires the treasurer to comply with best practices for retirement savings vehicles; maximize participation, savings, and sound investment practices; maximize simplicity, including ease of administration for participating employers and enrollees; provide an efficient product to enrollees by pooling investment funds; and ensure the portability of benefits.
A five-member Secure Choice Savings Board will be created to provide “ongoing fiduciary administrative oversight for the purpose of promoting greater retirement savings for private-sector employees in a convenient, low-cost and portable manner…” The board will also establish guidelines regarding fund administration.
The House adopted the bill 139-6, and the Senate 38-2. Gov. Maura Healey signed the bill into law, in part, on July 4. It isn’t clear if Healey’s approval included the IRA program.
The treasurer and Department of Revenue are required under the bill to maintain information on their websites for employers about the requirements of the program and on retirement plans that can be offered as alternatives to the program, 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).
Under the plan, employers won’t be fiduciaries or be liable for investment returns, program design, and benefits paid to program participants, according to the bill. However, they will be fined $250 per employee if the program isn’t implemented.
The National Federation of Independent Business (NFIB) has criticized the legislature for “slipping” the program into the fiscal year 2026 budget without hearings or public input on “the expansive regulatory scheme.”
“Without a public hearing to determine the financial impact on Massachusetts small businesses and their workers, the state legislature has blatantly shoehorned a major policy change without any oversight or public input into its new $61 billion FY2026 budget,” said Christopher Carlozzi, NFIB Massachusetts state director, in a press release.
“This massive, wide-reaching new program mandates that businesses of 25 employees or more enroll their workers into a state-run retirement plan or face hefty penalties and legal action. Small businesses already deal with a plethora of state-imposed payroll deductions ranging from UI taxes to PFML, as well as a new pay transparency mandate; they do not need the additional burden and compliance costs of yet another.”
NFIB argues against the law’s fine and against allowing employees to bring civil action against their employers.
“NFIB supports efforts to identify barriers to retirement savings, especially given the prevalence of low-cost savings options already available in the marketplace,” Carlozzi said in the release. “However, we do not support another payroll mandate on employers forcing them to manage and administer a new state-run program or face hefty fines and lawsuits.”
Similar legislation was passed in Hawaii and signed by the governor in May.
As of Jan. 1, 13 out of 20 state programs offer an auto-IRA, and two state programs are open to all other employers and workers through a voluntary marketplace or multiple employer plan.
Outside of state-run programs, and more specific to the collision repair industry, the Society of Collision Repair Specialists (SCRS) offers a 401(k) Multiple Employer Plan (MEP) to help participating businesses and employees save expenses relevant to their 401(k) balances and reduce administrative responsibilities for companies and provide fiduciary support.
For more information to evaluate how the industry-led plan stacks up to the state savings program, reach out to Scott Broaddus by phone at (804) 327-0424 or by email at [email protected], or Coley Eckenrode at (804) 327-0425 or [email protected]. An information request web form is also available here.
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