AARP Connecticut State Director Nora Duncan provided the following statement in regards to the Connecticut state senate passing Public Act 16-29, an act creating the Connecticut Retirement Security Program:
“We applaud the Senate leadership for their commitment to providing Connecticut’s 600,000 workers without a workplace retirement savings plan an opportunity to build a secure financial future for their families. We are confident the Governor will also support the bill that adds no additional cost to taxpayers and lead to less reliance on state-funded social safety net services in the future.”
Get the facts. Don’t believe the Myths.
There has been a lot of debate about PA 16-29, an act creating the Connecticut Retirement Security. Unfortunately, Connecticut residents are being given misinformation by opponents of the bill. We need to address the inaccuracies in order for residents to form an educated opinion. Some of the more prevalent myths ( a detailed report is available):
- MYTH: The legislation creates a state-run retirement savings plan for private sector employees.
- FACT: It is not a pension and it is not state-run. This public private partnership will create a plan to be managed by a financial firm. Similar to the retirement options offered by many larger companies, the IRA saving accounts will be owned by the employee and it will travel with employee from job to job. Companies choosing to select a plan other than with the vendor selected by the state can do so. The state will not be on the hook for gains, losses, or benefits.
- MYTH: The state will be able to take, or borrow, from the employee retirement savings accounts.
- FACT: The state is prohibited by state and federal law from taking or borrowing money from these accounts. These retirement accounts are held in a separate trust for the exclusive purpose of providing retirement income for employees.
- MYTH: Everyone has an option to save already.
- FACT: Workers are 15 times more likely to save for retirement when they have a workplace payroll deduction option. Fewer than 5% of people open an IRA on their own if they don’t have a way to save at work. Savings rates jump to more than 70% when there is an employer sponsored retirement savings plan available and more than 90% when automatic enrollment is used.
- MYTH: A better course of action is a strong focus on financial literacy for all ages and public awareness of retirement savings options.
- FACT: The truth is that over the last decade access to retirement plans has declined, 401(k) balances have stagnated, and healthcare costs have risen. Although education is necessary, it is certainly not sufficient to solve this problem. Studies have shown that, even with more education, people are 15 times more likely to save for retirement with an employer based payroll deduction savings account.
- MYTH: The government is forcing workers to put money they’ve earned into a retirement fund.
- FACT: Participation is voluntary and anyone can choose to opt-out. In addition, companies can choose to contract with any financial services provider they choose.