A quiet provision in an economic development bill could affect your payroll—here's what gym and studio owners need to know.
Most Massachusetts gym and fitness studio owners haven't heard of H5576, the economic development bill signed into law. But buried inside it is a requirement that could change how you manage employee benefits—and cost you money if you miss it.
The provision is called the Massachusetts Secure Choice program, and it's a state-run automatic retirement savings system for small businesses. Here's what you need to know.
If your gym or studio has 25 or more employees and does not already offer a retirement plan (like a 401(k) or SEP-IRA), you are required to participate. Employers with fewer than 25 employees are exempt.
The law defines "retirement plan" broadly—if you currently sponsor any employer-based retirement savings vehicle, you're not subject to the mandate. But if you have no plan in place, the requirement applies to you.
Once the program launches and the board confirms implementation, you must automatically enroll all eligible employees in the state IRA program through payroll deduction. Employees can opt out, but enrollment is automatic unless they choose otherwise.
The state runs the program, not you—your role is administrative. You process the payroll deductions and remit contributions to the state-administered account. The compliance burden is lighter than managing a private 401(k), but it is mandatory.
If you don't comply, penalties begin one year after the Department of Revenue issues guidance confirming the program is active. The initial penalty is $250 per employee per year. In subsequent years, that rises to $500 per employee per year.
For a gym with 30 employees, that's a minimum of $7,500 in year one, and $15,000 annually after that—a real cost for non-compliance.
The program is authorized under Section 64F (definitions) and Section 64I (employer obligations), inserted by Section 40 1/2 of H5576 (pages 64–73). The effective date depends on when the board confirms the program is ready to launch. There is no fixed deadline yet, but you should monitor announcements from the Massachusetts Department of Revenue and the Secure Choice board.
Review whether your business currently sponsors a retirement plan. If it does, you're exempt. If it doesn't, you have three options: (1) wait for the state program to launch and comply with automatic enrollment; (2) establish your own retirement plan before the mandate takes effect; or (3) reduce your headcount below 25 employees (not practical for most studios).
Many small business owners find that setting up a simple IRA or SEP-IRA before the mandate takes effect gives them more control over plan design and employee communication. That's a conversation worth having with your accountant or benefits advisor sooner rather than later.
The law is real, the penalties are real, and the timeline is uncertain—which means now is the time to act.
For state guidance on the Secure Choice program, monitor announcements from the Massachusetts Department of Revenue and the Secure Choice board website.