The First State-Facilitated MEP in the Nation:
How the MA CORE Plan is Helping Nonprofit Workers Save for a Financially Secure Retirement
By Deborah Goldberg, Treasurer, Commonwealth of Massachusetts
Massachusetts CORE Plan
The Commonwealth of Massachusetts Defined Contribution CORE Plan (CORE Plan) is a 401(k) multiple employer plan (MEP) overseen by the Office of the Massachusetts State Treasurer and the first of its kind in the country. The CORE Plan was signed into law in 2012 and covers eligible nonprofit organizations with 20 or fewer employees. Since its launch on October 27, 2017, the CORE Plan has helped Massachusetts nonprofit employees save and invest for a financially secure retirement. As Treasurer, I have continued to promote expansion of the program legislatively to ensure that all workers in the nonprofit sector have access to quality employer-based retirement benefits.
Motivation to Offer the CORE Plan
The CORE Plan sought to serve a significant need for retirement options in an often-underserved sector: nonprofit organizations. In 2017, according to the Bureau of Labor Statistics, only 46% of private-sector employers with fewer than 100 workers offered a workplace retirement savings plan.[i] In Massachusetts, there are more jobs in the nonprofit sector than in the manufacturing and financial services sectors combined[ii] — nonprofit employees are 18% of the total workforce in MA; the fifth-highest state percentage in the country.[iii]
Key Features and Advantages of Approach
The decision to use a MEP structure when developing a retirement plan for Massachusetts nonprofits was based on what our team believed would be most advantageous for both individual employees and employers covered under the program. The state-sponsored MEP design provides employee benefit protections, materially higher contribution limits (versus an IRA), and the potential for employer contributions while limiting the employer’s administrative and fiduciary responsibilities. Under the MEP structure, employers are not responsible for filing individual Form 5500s. The state, as plan sponsor, simply files a single Form 5500 on behalf of all participating employers under the Plan.
For employees auto-enrolled in the CORE Plan, the default savings rate is 6%, with an annual auto-escalation of 1% or 2% (per employer election) up to a total of 12%. With passage of the SECURE Act, the safe harbor escalation cap has been increased to 15%. The CORE Plan will follow these new guidelines as of January 1, 2021.
The investment line-up is designed to help employees easily invest in efficient portfolios. Based on individual risk tolerances, they can customize target date funds, full-service managed account options, or objective-based funds, while also being provided with the tools to manage the decumulation of assets in retirement effectively.
Results to Date
The CORE Plan has achieved several milestones over the past three years since its inception. As of October 1, 2020:
- More than 80 Massachusetts-based nonprofits have committed to joining.
- More than 600 eligible employees are covered.
- Of the eligible employees, 550 are active participants.
- Total assets under management now exceed $6.75 million.
Participant results extend beyond employees signing up to join the program. Of the nonprofits committed to the CORE Plan, 80 percent offer an employer contribution; employer contribution options include a basic safe harbor match formula or non-elective contribution of 3% or greater. For employees, these added savings increase the likelihood for strong, secure retirement outcomes.
Overall, the demonstrated demand for the CORE Plan with small, nonprofit employers confirms the need to extend coverage to nonprofits of all sizes. The overwhelming majority of eligible employees (more than 80%) had no workplace plan before enrolling in the CORE Plan.
There is a demand for quality, low-cost employer-based retirement options among small businesses. On average, employers participating in CORE employ seven employees, yet 80% still have opted to offer employer contributions. Launching CORE as a 401(k) from scratch presented the opportunity to apply the experiences and best practices observed over 40 years of defined contribution management and oversight.
With the MEP structure, we learned that all small nonprofits are not equal when it comes to retirement education and administrative capacity. The CORE Plan nonprofits range in size from the 20-employee maximum allowed to a single employee. Feedback from employer administrative staff has been critical in developing our onboarding and client services processes to serve them better. While our nonprofits are varied in their experience levels, they do have one commonality: a strong desire for a quality retirement option.
The CORE Plan continues to strive for simplicity in the user experience, at both the employee and employer levels. For employees and employers alike, the key to achieving future goals is hearing feedback directly from those participating, as well as those who are not enrolled but wish they could be.
With the early success of the CORE Plan and the demonstrated demand for quality employer-based retirement options, my office hopes to expand access to all nonprofits of every size throughout Massachusetts. Employment-based plans are the best way to ensure individuals save adequately for retirement, since only 13% of workers without access to a workplace plan regularly contribute to individual retirement accounts.[iv] We know that employees need access to affordable retirement options. It is most urgent that we support them in starting to save for their futures.
Deborah Goldberg is Treasurer of the Commonwealth of Massachusetts.
October 2020, 20-12
CORE — Connecting Organizations to Retirement, Plan Brochure, Office of the Massachusetts State Treasurer and Receiver General.
Massachusetts CORE Implementation Update, Georgetown University Center for Retirement Initiatives, August 31, 2020.
State-Facilitated Retirement Savings Programs: A Snapshot of Program Design Features, Georgetown University Center for Retirement Initiatives, August 31, 2020.