A New Approach to Your Retirement Benefits

Eligible MIT employees will receive an increase in the total amount of retirement income benefits they receive from MIT. Currently, through the existing 401(k) match and pension benefit, employees receive a minimum of 10% of their eligible pay in retirement benefits from the Institute (if they are receiving the full 401(k) MIT match of 5%).

Starting on January 1, 2027, in addition to MIT’s continuing to contribute an amount equal to at least 5% of employees’ pay to the existing, unchanged core pension benefit, all eligible employees will receive:

• An automatic contribution from MIT of an amount equal to 3% of eligible pay to their 401(k), whether or not they contribute; and
• An automatic contribution from MIT of an amount equal to 2.5% of eligible pay to a new Enhanced Pension Benefit.
   

Together, the annual MIT contribution adds up to a minimum of 10.5% of eligible pay – half a percentage point more than today, and an even larger increase for employees who are not currently maximizing their 401(k) match.

MIT is facing significant budget pressures caused by a nearly six-fold increase in our endowment tax rate and a material loss of federal research funding. These federal policy changes impose at least a $300 million new burden on the central campus budget, about a 15% loss.

MIT has developed a financial framework for addressing these pressures that aims to minimize reductions to unit budgets and employee positions. In addition to exiting expensive leased space and generating more revenue from new educational programs, the Institute has looked for ways to activate underutilized recurring resources.

The separate fund MIT uses to pay employee pensions is one of those opportunities. Due to years of strong investment returns, the Pension Plan has resources that exceed what is needed to sustainably fund existing pension benefits in a wide range of economic conditions, without requiring contributions from the campus budget.

MIT is, accordingly, modestly restructuring its retirement income benefits to use this surplus to create a new additional pension benefit for employees while reducing MIT's separate contribution to employee 401(k) accounts, which are funded from the stressed campus budget.

MIT’s minimum total contribution will increase, while at the same time the Institute will achieve much-needed savings for the campus budget by relying more significantly on our well-funded pension plan to provide for employees’ retirements.

Since announcing our budget framework last fall, we consulted with external and internal retirement plan experts, including some of our faculty specializing in the field. We modeled economic scenarios and considered complex accounting questions so that we could ultimately modestly restructure our retirement income benefits to use the Pension Plan surplus – helping to address the Institute's significant budget pressures while continuing to achieve strong financial outcomes for employees' retirements.

MIT’s 5% minimum contribution to your existing pension benefit will not change. Additionally, no action is required for you to start receiving MIT’s new, automatic 3% 401(k) contribution and the new 2.5% Enhanced Pension Benefit. Both MIT contributions will immediately go into effect on January 1, 2027.

Your 401(k) balance, including all MIT contributions, will remain in your account; your contribution elections, investment choices, and beneficiary designations will remain the same as well. You can change your 401(k) contribution elections, investment choices, and beneficiary designations at any time through Fidelity NetBenefits.

The 401(k) Plan is designed to help you save and invest for retirement while receiving tax advantages today.

Here is how it currently works: You contribute to your account through paycheck deductions up to IRS limits (the maximum amount the federal government allows you to contribute each year). You can contribute pre-tax dollars, Roth post-tax dollars, or a combination of both. MIT matches your contributions (pre-tax and Roth combined) up to 5% of your MIT pay. You then choose how your contributions – and MIT’s matching contributions – are invested. Your returns depend on the market performance of your investments. You are immediately vested in the contributions you and MIT make. Learn more about the 401(k) retirement benefit.

Starting in 2027, MIT will automatically contribute an amount equal to 3% of your eligible annual pay to your 401(k) – regardless of the level of your own contribution.

We will then shift the remaining 2 percentage points of the current maximum 401(k) match – and add half a percentage point on top of it – to create a new Enhanced Pension Benefit totaling 2.5% of your eligible annual pay.

The MIT contribution is changing from a matching contribution to an automatic contribution of 3% of an employee’s eligible pay. An employee contribution is not required to receive this 3% contribution from the Institute. Instead of matching your contributions up to 5% of your eligible pay, MIT will automatically contribute an amount equal to 3% of your eligible pay regardless of whether you contribute to the 401(k). When we change MIT’s maximum 401(k) contribution from the equivalent of 5% of annual pay to 3% of annual pay, the contribution must become automatic for our plan to retain current legal protections.

Under the new structure, MIT will automatically contribute an amount equal to 3% of your eligible pay to your 401(k), whether or not you make a contribution of your own. For those who get the full 401(k) match, the total of what MIT will contribute across your 401(k) and pension benefit will increase from a minimum of 10% to a minimum of 10.5% for all eligible employees.

That 2% is shifting to the new Enhanced Pension Benefit under the Pension Plan – along with an additional 0.5%. The 2% becomes 2.5% in the Enhanced Pension Benefit, which is guaranteed to earn at least 4% interest annually and could earn up to 15%.

MIT is committed to helping you build a secure future. Starting on January 1, 2027, MIT will automatically contribute an amount equal to 3% of eligible pay to employees’ 401(k) accounts, regardless of their own contributions. Today, employees who do not receive the full 401(k) match do not get the full minimum 10% retirement income benefit. Under the new approach, all eligible employees will automatically receive an MIT contribution equal to at least 10.5% of their pay in retirement income benefits.

This change supports all eligible participants, helping them to start building a retirement foundation from day one. If this is the first time you will be participating in the 401(k), consider visiting Fidelity NetBenefits to name your beneficiaries and choose how you want MIT’s contributions to be invested. If you do not have an investment election on file, MIT’s contributions will be invested in the age-appropriate Vanguard Target Date fund.

No other features of the 401(k) Plan will change. You can continue to contribute as much as you like, up to 95% of your pay but no more than the annual IRS limits (the maximum amount the federal government allows you to contribute each year), choose from available investment options, and take a loan before retirement if needed – and your account is immediately vested.

Yes, you can still make your own contributions up to the IRS limits, and you can change your contribution preferences at any time through Fidelity NetBenefits.

You may change your investment preferences at any time through Fidelity NetBenefits. MIT’s automatic 3% contribution will be allocated based on your investment choices. If you do not have an investment election on file, MIT’s contributions will be invested in the age-appropriate Vanguard Target Date fund.

You do not need to change anything as a result of MIT’s moving to the automatic 3% contribution. Any changes you make should be based on your individual goals and personal financial situation – and mindful of the many benefits of saving for retirement.

The MIT Pension Plan provides a “core” retirement benefit that will be paid to you upon your retirement as either a lump sum (subject to certain requirements) or as monthly income (called an annuity) for the rest of your life. How your pension is calculated depends on your hire date: before July 2, 2012, or on or after July 2, 2012.

Learn more about how the pension benefit works.

The Enhanced Pension Benefit is a new, separate account within MIT’s Pension Plan. Eligibility to participate follows the same rules that apply to MIT’s core pension benefits, including the applicable one-year waiting period to begin earning benefits. Starting on January 1, 2027, for eligible employees, MIT will contribute an amount equal to 2.5% of your eligible pay into this account and provide interest credits each month. The Enhanced Pension Benefit is in addition to your existing, unchanging core pension benefit.

No. The Cash Balance and Career Pay Benefits will continue exactly as they are. The Enhanced Pension Benefit is a new, separate pension benefit in addition to your existing core pension benefit.

Based on an analysis of 5,000 economic scenarios, the new approach is expected to produce comparable or better retirement balances the majority of the time. This is because of MIT’s making its contributions to retirement income benefits fully automatic and larger. 

There can be instances where the current approach would outperform the new approach – including circumstances where there is sustained strong stock market performance over a long period of time, or exceptional stock market performance and low bond yields within a more compressed timeline.  However, these are instances where either the current or new approaches would yield high retirement balances. This is because you will still benefit from stock market performance through your own 401(k) contributions and MIT's automatic 3% 401(k) contribution.

It's also worth noting that the new approach provides important protection against market downturns, since your pension will earn a guaranteed 4% return regardless of how the market performs.

No. Unlike the 401(k), the Enhanced Pension Benefit cannot be borrowed against before retirement.

No. MIT manages the investments in the Pension Plan, including the new Enhanced Pension Benefit, to ensure it can meet its full range of pension obligations. Interest credits for the existing Cash Balance Pension Benefit and the new Enhanced Pension Benefit for a calendar year are determined based on U.S. long-term corporate bond rates reported by the IRS (for reference, the current Interest Crediting Rate for 2026 is 5.69%). The Enhanced Pension Benefit will earn at least 4% and no more than 15% annual interest.

The Enhanced Pension Benefit has similar features to the existing Cash Balance Pension Benefit. MIT fully funds both; their balances are guaranteed to earn at least 4% and no more than 15% annual interest; and both can readily be converted to lifetime monthly income at retirement. The Enhanced Pension benefit is in addition to the existing, unchanged core pension benefit. Apart from being an additional benefit, it is different from the existing, unchanged core pension benefit in that all employees can elect to take it as a lump sum. Only employees with 15 or fewer years of service at MIT or a cash balance of $75,000 or less can take the existing pension benefit as a lump sum.

The new Enhanced Pension Benefit will be calculated in a similar way to the Cash Balance formula under the core pension benefit. Each year, you will receive a contribution equal to 2.5% of eligible pay. In addition, your Enhanced Pension Benefit will earn interest using the same interest crediting rate that applies to the Cash Balance formula under the core pension benefit.

The Pension Plan’s assets as of January 1, 2026, were 123% – more than is needed to fund projected benefits in a wide range of economic conditions. We have tested its ability to provide this Enhanced Pension Benefit alongside the existing, unchanged core pension benefit. In most conditions, the Plan remains fully funded. And if an adverse scenario required it, MIT is committed to adding money to the Plan to maintain funding levels to meet all of the Institute’s obligations to employees.

As with the core pension benefit, the Enhanced Pension Benefit vests after three years of service – meaning that is when the money is fully guaranteed to be yours at retirement. If you have already been at MIT for three or more years, you will be vested from day one of the new benefit. If you are newer to MIT, you will become eligible for the Pension Plan after one year of service and will be vested in the pension benefits – both the core pension benefit and Enhanced Pension Benefit – once you complete three years of service.

If you die before beginning to receive any of your pension benefit, the full value of both benefits (core and Enhanced Pension Benefits) will be paid to your spouse or other designated beneficiary. A spousal beneficiary may choose to receive the benefit as either a lump sum or a monthly annuity. Other beneficiaries will receive the benefit as a lump sum.

You may designate one or more beneficiaries to receive your benefit. If you are unmarried and do not have a beneficiary designation on file at the time of your death, the lump sum value of your pension benefit will be paid to your estate.

Because the core pension benefit and Enhanced Pension Benefit may be distributed separately, receiving a lump-sum distribution of one benefit does not affect any rights under the other benefit. Once a particular pension benefit (core or Enhanced) is paid as a lump sum, that benefit is considered fully paid, and no additional benefits will be paid.

If you die while receiving annuity pension payments, your monthly payments generally stop upon your death. However, if you elected an annuity option that provides survivor benefits, such as a Joint and Survivor Annuity or an annuity with a guaranteed payment period, payments may continue to your designated beneficiary in accordance with the terms of the annuity option you elected. For example, if you elected a 50% Joint and Survivor Annuity, monthly payments would continue to your surviving beneficiary after your death at 50% of the amount paid during your lifetime. Read more details about retirement income distribution options.

The Benefits team in Human Resources is available to assist with retirement questions. They can be reached by email, or by calling 617-253-6151. General information about retirement is available on the HR website.