However, there is one little-known defined contribution (DC) plan that has been in existence for some 11 years within the Commonwealth’s Board of Higher Education. The plan, officially known as the Optional Retirement Plan (ORP), is open to all newly hired faculty and senior administrators of the 5 UMass schools, 9 state colleges, and 15 community colleges.

New hires have 90 days to join the ORP, otherwise they become members of the state plan. Non-vested (less than 10 years service) faculty were given the option of transferring to the ORP plan within 90 days of its inception. Those who chose to join the ORP received a transfer of their contributions in the state fund to the ORP. A decision to join the ORP is irrevocable.

There are 2,757 active employees currently in the ORP and another 2,500 inactive employees who have left their money in the plan, which under IRS regulations is a 401(a) plan. This is similar in some ways to a 401(k) plan.

Members contribute the same percentage of their salary to their account that state employees contribute to their pension fund. In addition, the state contributes 5 percent to each account from which life and disability insurance and administrative overhead costs are deducted, leaving a net contribution of 4.3%. Health insurance contributions are the same as retirement system members.

ORP participants have a variety of investment options. The current managers of these plans are the Lincoln Financial Group, TIAA CREF and AIG. A participant’s retirement income is based on the accumulations in his account.

The ORP is administered by Peter Tsaffaras, the Board of Education’s Director of Employee Benefit Relations.

Tsaffaras has an excellent understanding of our Chapter 32 DB retirement plan, which is necessary so that he can explain the pros and cons of both the ORP and our DB plan. Although Tsaffaras, himself, is a member of the state retirement plan, he doesn’t take sides. “It’s an individual decision,” he said.

Tsaffaras, a Quincy resident, has an office in the McCormack building, upstairs from the State Retirement Board. About one-third of eligible Higher-Ed people select the ORP he said. When asked how many plan enrollees inquire about transferring to the state plan, he replied, “About eight or ten each year. Sometimes it depends on how the market is doing.” Because the plan is relatively new, Tsaffaras said that only a dozen or so have thus far retired.

The Legislature enacted the plan at the urging of the Mass Teachers’ Association and Higher-Ed officials so that our state’s higher education systems could attract educators from outside of Massachusetts who would otherwise be reluctant to transfer because of a lack of portability.

“Several unions and our Association were opposed to the legislation at the time it passed. We respect the MTA,” said Association’s President Ralph White. “But there was a very real fear that the DC concept would spread to other areas of government, weakening our state’s pension fund which depends on a large pool of investment capital.

“Although Governor Mitt Romney touched on the DC concept, a 401(k) type plan, when he first took office, he soon became engaged in other pursuits and it went by the wayside. Fortunately, the Higher-Ed ORP plan has remained below the radar screen. But it’s certain that Kerry Healey knows about it.”