Treasurer Grossman Announces Major Step Forward in Creation of Nonprofit Retirement Plan

At yesterday’s Nonprofit Awareness Day celebration, Treasurer Steven Grossman announced that the Internal Revenue Service (IRS) ??????????????????????????????has ruled favorably on a proposal to create a new 401(k) plan that will make tax-deferred retirement savings available to more nonprofit sector workers, a plan MNN worked closely with the Treasurer’s Office to have signed in to law by Governor Patrick in 2012.

“This is a huge step forward, bringing us closer to the point when we can dramatically enhance the availability of retirement plans to nonprofit workers,” said Grossman. “These women and men provide critical services that reach underprivileged and struggling segments of our community, and this provision will benefit thousands of people as they continue that important work.”

In March of 2012, Governor Deval Patrick signed into law a bill that would permit the Treasurer’s Office to administer a deferred compensation plan for employees of non-profit organizations with staffs of twenty or fewer.  The proposed Connecting Organizations to Retirement (CORE) 401(k) plan would allow participating employees to deduct pre-tax dollars from their paycheck and invest them in a tax-deferred market portfolio.  The Treasurer’s Office would administer the participant-funded plan at no additional cost to taxpayers.

“This program will be the first of its kind in the country, leveraging existing resources at no additional cost to taxpayers, to support nonprofit workers,” said Jakious.”It will be a game changer because studies have repeatedly shown that the concerns over retirement savings are a significant barrier to recruiting and retaining people into the nonprofit sector.”

Since the approval of the legislation, Treasury has been working with the IRS to ensure that the proposed program complies with all applicable laws and is permissible under the tax code.  While additional approval from the IRS is still needed, according to the Treasurer’s office, the favorable ruling confirmed that the proposal meets federal requirements and represents the most significant step forward on the effort to date. You can view the press release from the Treasurer’s office here.