Plan roll out begins in 2017 and will be fully operational by 2018
AARP Connecticut praised the enactment of the Connecticut Retirement Security Program (Public Act 16-29), signed into law by Governor Dannel P. Malloy on May 27.
“We applaud Connecticut for creating a plan that provides 600,000 workers without a workplace retirement savings plan an opportunity to build a secure financial future for their families,” said Nora Duncan, AARP Connecticut state director. “The law adds no additional cost to taxpayers and will lead to less reliance on state-funded social safety net services in the future.”
The law was the product of the Connecticut Retirement Security Board (CRSB), co-chaired by State Comptroller Kevin Lembo and state Treasurer Denise L. Nappier. The CRSB, created in 2014 by the Connecticut Legislature, was charged with providing legislators with recommendations about the efficacy of a workplace savings plan for workers in the state without access to such a program. They submitted its evidence-based recommendations to the Legislature, which were overwhelmingly in favor of creating a voluntary retirement savings program for private sector workers in the state who are currently without access to a workplace savings plan.
Through the legislative leadership of Senate President Martin Looney and House Majority Leader Joe Aresimowicz, the general assembly enacted many of the recommendations of the CRSB.
The new law will include the formation of a quasi-public/private Connecticut Retirement Security Authority starting on January 1, 2017. The authority will have oversight of the Connecticut retirement security plan which will begin operation in 2018. The plan will require all Connecticut businesses of five or more employees with no pension or 401 K plan option to participate in the retirement security program. It will be voluntary for employees, who will be automatically enrolled but have the ability to opt out, and employers will not be required to match contributions. The default employee contribution rate for people who do not opt out will be 3 percent of their pay, which will go into a private Roth IRA account that they select from the available vendors. Employees will be able to increase or decrease the contribution rate. The vendor/vendors for the Roth IRA’s will be chosen by an RFP conducted by the authority. Fees charged to individuals by the vendor/vendors selected are capped at 75 basis points. The authority will have the option in the future add a traditional IRA plan to the employee choices. The retirement security program will be funded by the fees from contributions of the employees participating
In the U.S., there is a $7 trillion retirement savings deficit among older Americans according to data from The Center for Retirement Research at Boston College. Further, AARP Public Policy Institute studies show that people are 15 times more likely to save for retirement if they can do so through a payroll deduction program at work.