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Deborah Goldberg, Massachusetts State Treasury

Plan aims to shrink burdens for small non-profits

Deborah Goldberg uses the multiemployer structure to simplify administrative tasks.

Deborah Goldberg knows the difficulties faced by employers of small non-profit organizations in providing retirement plans for employees.

She is president of an adoption agency, was a founder of a music academy for young adults with intellectual disabilities and is an adviser to a food bank.

As the Massachusetts state treasurer and receiver general, she is in charge of a new program that allows small non-profits — those with 20 employees or fewer — to participate in a multiemployer 401(k) plan. The plan inaugurated a “soft launch” during the first week of October for about 100 non-profits, with a full-scale launch set for early November.

“Savings for retirement is a basic,” said Ms. Goldberg, who received an Innovation Award. “We understand the relationship between retirement savings and financial literacy.”

Ms. Goldberg is building upon an effort started by her predecessor, Steven Grossman, who won an Innovator Award in 2014 for the Massachusetts program. At the time, he was developing a plan to meet the requirements of a 2012 state law that also covered small non-profits that didn't offer a defined contribution plan. When Mr. Grossman received the award, the state was waiting for an Internal Revenue Service ruling on its efforts.

The scope of coverage is the same — non-profit organizations with 20 or fewer employees that don't offer retirement plans — but the state decided to take a different approach to implementing the program, explained David Lynch, executive director of defined contribution plans in the treasurer's office.

Based on guidance from the Department of Labor, the state developed a multiemployer 401(k) plan rather than the original goal of a 401(k) volume submitter plan. Under the latter, each employer would have had to adopt individual plans and trusts, become the named fiduciary, be responsible for plan compliance and file a Form 5500.

Even though the IRS gave the OK for the volume submitter plan, the issuance of DOL guidelines for multiemployer plans “was new,” Mr. Lynch said. “So, we changed course.”

The multiemployer plan reduces the administrative and fiduciary duties for the individual organizations. The state is the plan sponsor and is the named fiduciary and plan administrator. The state plan files a single Form 5500 and is responsible for filing plan documents. Aon Hewitt Investment Consulting is the investment consultant and Empower Retirement is the record keeper.

“We felt this provided more flexibility from a design structure,” Mr. Lynch said. “We're hopeful about the coverage of the non-profit sector.”

He said the Massachusetts plan differs from the various “Secure Choice” retirement plans being offered or proposed in several states, which are mandatory IRA plans — an approach that impressed the Eddy judges.

“The innovative aspect of this relative to other state initiatives is interesting to those of us in the industry,” wrote one judge.

“It's certainly innovative in that it's the first state to offer a state-sponsored ERISA MEP 401(k) to private-sector employees,” another judge wrote. “It's also a very worthwhile effort to help increase the number of small non-profit employers offering retirement benefits to their employees.”

Ms. Goldberg said that although the current program will help small non-profits, she believes “it should be available to all non-profits.” Earlier this year, her office introduced a bill in the state Legislature to lift the 20-employee limit for the program.