A mandatory retirement savings requirement buried in Massachusetts economic development legislation will affect most mid-size manufacturers—and many owners don't know it exists yet.
Most Massachusetts manufacturers haven't heard of it yet, but a provision in H5576 (Relative to Economic Development in the Commonwealth) will require many of them to automatically enroll employees in a state-run retirement savings program or face escalating financial penalties.
Here's what you need to know.
If your manufacturing business has 25 or more employees and does not currently offer a retirement plan—401(k), pension, or similar—you will be required to participate in the Massachusetts Secure Choice program. Employers with fewer than 25 employees are exempt.
The program is defined and employer obligations are outlined in Section 64F (definitions) and Section 64I (employer obligations), inserted by Section 40 1/2 of H5576 (pages 64–73).
Qualifying employers must automatically enroll all eligible employees in the state-administered IRA program. Employees' contributions are deducted from their paychecks and sent to the state program. Employers do not contribute to the accounts—this is employee-funded only—but you are responsible for managing the enrollment and payroll deduction process.
Employees can opt out if they choose, but the default is automatic enrollment.
Failure to comply carries financial consequences. Employers who do not enroll qualifying employees face a penalty of $250 per employee per year. In subsequent years, that penalty increases to $500 per employee per year.
For a manufacturer with 50 employees, that's a potential $12,500 annual penalty in year one, and $25,000 in year two and beyond—a significant cost for non-compliance.
The Secure Choice program will launch once the program board confirms implementation is ready. Penalties begin one year after the Massachusetts Department of Revenue issues guidance to employers on compliance requirements.
This means there will be a window between program launch and penalty enforcement, but manufacturers should not assume this window will be lengthy. Planning ahead is prudent.
If you fall into the 25+ employee category and lack a retirement plan, you have three realistic options: (1) establish your own retirement plan to avoid the requirement; (2) join the Secure Choice program; or (3) face the penalties.
Option one—establishing a plan—may be worth exploring with a benefits advisor or accountant, as it gives you control over plan design and may offer tax advantages. Options two and three are largely administrative or financial burdens.
The key is to act before the penalty phase begins. Once the Department of Revenue issues guidance, the clock starts on the one-year compliance window.
Massachusetts manufacturing associations and local chambers of commerce have begun circulating plain-language guides to H5576's Secure Choice provision, including compliance checklists and plan comparison tools. These resources are available free to members and can help you assess which option makes sense for your operation.
Source: H5576, Section 40 1/2, Section 64F and Section 64I (pages 64–73); Massachusetts Legislature.