A new, state-run plan could help more workers in the nonprofit sector build greater economic security when they retire.
Setting up and managing retirement plans can be too expensive for small employers. And when they do offer plans, the participants tend to pay higher fees than those at larger employers.
In late 2017, Massachusetts launched a state-administered 401(k) plan - the Connecting Organizations to Retirement (CORE) Plan. Small nonprofits with 20 employees or fewer are able to join this plan for which the Office of the State Treasurer and Receiver General will take on the bulk of administrative responsibilities as plan sponsor.
Through economies of scale the treasurer, as plan sponsor, is better equipped to obtain lower fees and expenses than in typical private plans. Even seemingly small fee differences can have a significant effect on retirees' savings. The chart below illustrates how differences in fees can affect long term returns under the CORE plan's upper- and lower-range fee structures compared with typical fee structures of comparable 401(k) plans.
Massachusetts is one of the only states that is implementing this type of plan for nonprofit workers.
Read the full report here.
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