The Path Toward Retirement Security
Public Act 16-29, enacted in 2016, creates the Connecticut Retirement Security Authority. The Authority will be responsible for implementing a program to provide private-sector employees with retirement savings accounts if they current lack access to one through their employer.
Why is this important?
There are Nearly 600,000 working people in Connecticut with no access to workplace-based retirement savings and that number is growing. An entire generation of lifelong hardworking middle class people is headed to retirement financially unequipped.
This is a very serious problem, not only for those individuals and families forced to delay retirement indefinitely, but for our entire state economy.
Do we need a PUBLIC-SECTOR solution or a PRIVATE-SECTOR solution?
A private-sector solution should be the first answer to the retirement security crisis – however, the private market has simply failed to reach nearly half of our workforce, despite their efforts. Half of Connecticut employers not offering any retirement plan said they would select a private-market option if the program is implemented – so it would actually increase business in the private market. The goal is not to compete with or replace the private market, but to fulfill a significant unmet need in the market.
MATTER OF FACT: What will the retirement savings program do?
MYTH BUSTERS: What does the proposal NOT do?
The program will NOT be mandatory for businesses with fewer than five employees or those that already offer a workplace-based retirement savings option.
“But anyone can get an IRA!”
Any employee without a workplace-based savings mechanism can simply walk into a financial institution and establish an independent retirement account on their own – but they are not. That would happen in an ideal world – but in the real world it’s simply not happening for a variety of reasons, including cost and misunderstanding of the financial industry. It is a plain and research-proven fact that retirement savings rates vastly increase when available through payroll deduction.
For more information, read the frequently asked questions below.
FREQUENTLY ASKED QUESTIONS
How much will Connecticut taxpayers have to pay into the retirement program?
Nothing. This program is designed to be self-sustaining.
Will employees be forced to participate in this program?
No, employee participation is strictly voluntary and those who do participate can change their contribution rate at any time to make it higher, lower, or zero.
How much will employers have to pay into the retirement program?
Employers contribute NOTHING to the program. Employers, however, must deduct employee contributions from payroll. Depending on the payroll system they use, it could have an administrative cost.
Do businesses support this program?
A majority of businesses surveyed by AARP supported the idea of a state-sponsored retirement program.
Shouldn’t retirement security be left to the private sector?
Retirement security should be addressed by the private sector, but nearly 600,000 workers currently have no access to workplace savings – and that number is growing. Most employers surveyed said they would offer a private-sector plan if the program is implemented, so program implementation will actually increase business in the private market.
Can the state take money from participants’ retirement savings?
No. The state is legally prohibited from accessing or withdrawing any funds out of participants’ retirement accounts.
Will employers be forced to participate in this program?
No. Employers with five or more employees will be required to offer a retirement savings program to their employees, but it doesn’t have to be the state program.
When are you able to access the savings? Are there penalties if you withdraw the money?
If the participant is enrolled in a Roth IRA, there are no penalties to withdraw contributions. Participants with a traditional IRA or a Roth IRA can access the savings at 59 ½ years old.
If an individual moves to a job out of state, what happens?
Once enrolled in the program, individuals can continue to contribute by check from anywhere, leave the account until retirement, or rollover to another retirement account as is allowed under federal law.
Can someone deposit a lump sum?
Once a participant is enrolled in the program, they may deposit additional lump sums via check at any time, in addition to having their contributions deducted through payroll.
Can’t any employee without a workplace retirement savings option simply open their own IRA on their own at any time?
Yes, but employees are 15 times more likely to contribute to a savings program if it is offered through a payroll deduction at work than if they have to open an IRA on their own.