Treasurer Goldberg and David Lynch Provide Testimony to Joint Committee on Public Service Regarding SMART Plan Legislation
State Treasurer Deborah B. Goldberg and David Lynch, Executive Director of MA Deferred Compensation, provided written testimony to the Joint Committee on Public Service in support for H.2517 and S.1698, An Act relative to the SMART Plan, filed by Representative Ann-Margaret Ferrante and Senator Joan Lovely. These bills would enhance the retirement security of thousands of public workers in Massachusetts by creating an automatic enrollment feature of the Massachusetts Deferred Compensation SMART Plan for all future state employees and similarly for new employees of local governmental bodies who elect to participate.
REMARKS OF TREASURER DEBORAH B. GOLDBERG AND DAVID LYNCH
Joint Committee on Public Service
Tuesday, July 26, 2023
As prepared for delivery:
Dear Chairs Gordon and Brady,
We are writing to offer our strong support for H.2517 and S.1698, An Act relative to the SMART Plan, filed by Representative Ann-Margaret Ferrante and Senator Joan Lovely. This bill would enhance the retirement security of thousands of public workers in Massachusetts by creating an automatic enrollment feature of the Massachusetts Deferred Compensation SMART Plan for all future state employees and similarly for new employees of local governmental bodies who elect to participate.
The SMART Plan is a voluntary retirement savings program that allows eligible employees to save and invest before-tax and after-tax dollars through salary deferrals into a wide array of low-fee investment options. Currently, participation in the SMART Plan is optional and requires employees to actively enroll. However, research shows that automatic enrollment is a powerful tool to help employees achieve security in retirement as demonstrated by increased participation rates and savings levels in retirement plans with automatic enrollment. Many states also recognize the importance of automatic enrollment and are already utilizing this tool, with about half the states in the country now offering some form of automatic enrollment1. In fact, recently passed comprehensive retirement reform legislation under SECURE 2.0 now requires all new 401(k) and 403(b) plans, beginning in 2025, to automatically enroll new employees at an initial contribution amount between three and ten percent.
It is widely known that most Americans are not saving enough, or even at all, for retirement. In Massachusetts, full-time state employees do not pay into Social Security and face a ten-year credible service vesting period for state pension benefits, making it more difficult for our state employees to adequately prepare for their retirement. This legislation would address this issue by providing an automatic enrollment feature for state employees—consistent with federal guidance—which would help promote participation in retirement plans by reducing complicated barriers and streamlining the process.
Importantly, automatic enrollment does not mean mandatory participation. To ensure employees are provided as much optionality as possible, all automatically enrolled employees will be provided with a notice informing them of their ability to opt-out without penalty and receive a refund within 90 days. They would also have the flexibility to change their contribution rate of investment choices according to their preferences and circumstances at any time. This bill would provide as much optionality as possible for employees to make informed decisions about their retirement savings.
To ensure the economic stability, security, and opportunity for our public employees, it is vital that we provide them the opportunity to save for their future. Therefore, we respectfully request that the Joint Committee on Public Service endorse H. 2517 and S. 1698 with a favorable report.
Thank you for your attention on this matter. If we can provide any additional information in support of these bills, please do not hesitate to contact us.