In Massachusetts, 56% of nonprofit organizations with budgets of less than $250,000 do not offer retirement savings programs to their employees. In many cases, especially for smaller businesses, this is a direct result of budget constraints. Therefore, it’s crucial that state workers at nonprofits have an accessible way to save for their golden years.

In order to simplify the process of establishing a retirement plan as a nonprofit, Massachusetts established a state-run solution. The Massachusetts Defined Contribution CORE Plan was created to help nonprofit employers in the state provide a valuable retirement savings program for their employees.

In this article, we’ll answer some questions you may have about the Massachusetts CORE Plan and explain how it affects Massachusetts businesses.

How Does the Massachusetts CORE Plan Work?

Launched in 2017, the Massachusetts CORE Plan is a retirement savings plan specifically designed to serve the needs of small nonprofit organizations in the state. This state-led initiative is a voluntary program for eligible employers who are seeking to offer retirement benefits for their employees.

Structured as a Multiple Employer Plan (MEP), the Massachusetts CORE Plan allows each adopting employer to join under one plan and trust by executing a Participation Agreement. Under the MEP structure, the Commonwealth of Massachusetts Office of the State Treasurer and Receiver General acts as CORE Plan Sponsor, assuming most administrative responsibilities on behalf of participating employers and their employees.

All employees of a participating employer are automatically enrolled in a 401(k) plan and eligible to choose between pre-tax contributions or a Roth 401(k). The default savings rate is 6% of their pre-tax pay, with annual increases of 1% or 2% up to a maximum contribution rate of 15%. Employees have the ability to increase or decrease their savings rate at any time.

Which Businesses are Affected?

The Massachusetts CORE Plan was created to empower small nonprofit organizations to establish a retirement savings plan. As a voluntary program, nonprofit Massachusetts businesses with 20 employees or less may elect to participate.

Registration Deadline

There is no set deadline for employers to enroll in the CORE plan.

Penalties

Since participation in the program is voluntary for both employers and employees, there are no associated penalties.

Who is Eligible to Save With the Massachusetts CORE Plan?

The program is voluntary for employees, and they can change their contribution amount or opt out at any time. In order for employees to be eligible to receive the benefits of the CORE Plan, employers must first choose to offer the plan.

Conclusion

The Massachusetts CORE Plan represents a notable development in retirement planning for Massachusetts workers. Automatic enrollment and contributions made directly through payroll deductions simplify the process of setting aside funds for retirement.

The program enables nonprofit businesses with 20 employees or less to participate in the Massachusetts CORE Plan, so it’s important for Massachusetts employers to familiarize themselves with the program details and requirements.