Grossman Heralds Passage of Non-Profit Deferred Comp Plan
New Law Will Expand Retirement Options for Non-Profit Workers
Treasurer Grossman joins Governor Patrick, Senator Flanagan, Representative Bradley, and Senator DiDomenico.
Treasurer Steven Grossman today praised the passage of a bill he has advocated for that will allow his office to offer a tax-deferred retirement savings plan to employees of non-profit organizations. The bill was signed by Governor Deval Patrick this afternoon.
“In too many cases, non-profits simply haven’t had the resources to administer an affordable deferred compensation plan for their employees, resulting in countless people being isolated from a safe and secure retirement. That changes today,” said Grossman. “Non-profit workers provide important services that reach underprivileged and struggling segments of our population, and this new law will incent thousands of people to continue that critical work.”
In-house administration of deferred compensation plans has proved financially challenging for many non-profits, particularly smaller ones. According to the Boston Foundation, a full 56 percent of grassroots organizations with budgets of less than $250,000 do not offer any retirement plans to their employees. Overall, an estimated fourteen percent of the Massachusetts workforce, or 460,000 people, is in the non-profit sector.
Now that the bill has become law, the Treasury will work with the Internal Revenue Service to set up a retirement savings plan that will be available to all non-profit organizations in Massachusetts with twenty or fewer employees. Much like a 401(k) or 403(b), this plan would deduct pre-tax dollars from an employee’s paycheck and invest them in a tax deferred market portfolio. The Treasurer’s Office would administer the participant-funded plan at no cost to taxpayers.
“Nonprofit professionals are part of every aspect of our lives. They educate us, keep us healthy, care for the underserved and protect our cultural, historical and environmental treasures,” said Rick Jakious, CEO of the Massachusetts Nonprofit Network (MNN). “This law is important because it takes care of the nonprofit workers who take care of the Commonwealth.”
Grossman said that most non-profit workers tend to stay in that sector, and that a lack of viable deferred compensation plans can impede an entire segment of the workforce from planning appropriately for retirement. He also highlighted the issue of gender inequity, noting that a disproportionate amount of women work at non-profits.
The Treasurer’s Office presently oversees tax-deferred retirement savings accounts for over 280,000 government workers, giving it the existing infrastructure and expertise to set up these non-profit accounts.