Connecticut Retirement Security Program: The stats and the basicsCreated through Public Act 14-217 in July 2014, the Connecticut Retirement Security Board (CRSB) performed a two-year study on the feasibility of a state-sponsored retirement savings program for Connecticut workers. In January 1, 2016, the CRSB presented the results of its market feasibility study and concluded that a plan with a 6% default contribution rate and auto-enrollment would be financially feasible and expected to become self-sustaining between years three and five. The CRSB study suggested the use of traditional and Roth IRA accounts with one investment option aligned with the individual’s target retirement date (in simpler terms, a target-date fund). While critics of the program point out that any worker could open an IRA on their own at any time, the reality is that a plan with auto-enrollment and automatic paycheck deductions could benefit Connecticut workers for two main reasons. First, according to Connecticut-specific data from the Schwartz Center for Economic Policy Analysis at The New School, in 2010 only 59% of employers in the state offered a retirement plan, down from 66% in 2000. The Connecticut Retirement Security Program could bridge the estimated four out of ten workers without a workplace retirement account. Second, the 2017 Retirement Confidence Survey from the EBRI reported that approximately two out of every three of non-saving workers say they would be likely to save for retirement if automatic paycheck deductions with the option of changing or stopping them, at either 3% or 6% of salary, were used by their employer. By mandating employers with five or more employees to offer the plan, the State of Connecticut could boost retirement savings across the state.
How the Connecticut Retirement Security Program worksUnder the Retirement Security Program, employers who, on October 1st of the preceding calendar year employ five or more employees in Connecticut and don’t offer a workplace retirement plan would have to automatically enroll employees in the state-sponsored plan. Within 30 days of hire, qualified employers will be required to provide each employee a participation disclosure describing the mechanics of the plan. From that date, employees will have up to 60 days to decide whether or not to opt out of the plan. Eligible employees can choose between a traditional IRA or Roth IRA account and those employees failing to make an election will receive a traditional IRA by default. In 2017, workers can contribute up to $5,500 ($6,500 if age 50 and over) to a traditional or Roth IRA. However, high-earning individuals choosing a Roth IRA may be subject to lower contribution limits. In 2017, here’s how much you can contribute to a Roth IRA:
|Tax Filing Status||Modified Adjusted Gross Income||Contribution Limit|
|Single, head of household, or married filing separately and you don’t live with your spouse at any time during 2017||Under $118,000||Up to $5,500|
|$118,000 – $132,999||A reduced amount *|
|$133,000 and over||Zero|
|Married filing separately and you live with your spouse at any time during 2017||Up to $10,000||A reduced amount *|
|$10,000 and over||Zero|
|Married filing jointly or qualifying widow(er)||Under $186,000||Up to $5,500|
|$186,000 – $195,999||A reduced amount *|
|Up to $196,000||Zero|
Is the Connecticut Retirement Security Program mandatory?Yes, once implemented, this state-sponsored plan will be mandatory for all employers in the private sector who meet the following criteria:
- Employs five or more employees who received at least $5,000 in wages during the previous year
- Has been in business for at least one year
- Has never and does not offer a qualified retirement plan, such as a 401(k)
- If a qualified employer fails to enroll an eligible employee, the employee or the labor commissioner on behalf the employee may bring a civil action to require the employer to enroll the employee in the plan and cover reasonable attorney’s fees as set by the court.
- If a qualified employer fails to transfer employee contributions to the plan, the employer is punishable by imprisonment and fines depending on the amount withheld. For example, an employer keeping $2,000 becomes guilty of a class D felony, punishable by up to five years in jail and/or a fine from $2,000 to $5,000.
Eligibility of employees: Which employees qualify?Covered employees are those employed by a qualified employer in Connecticut who:
- Are of age 19 or over
- Have been employed for at least 120 days
- Provide services within Connecticut as established in Section 31-222 and not exempt from “employment” as established in Section 31-222(a)(5).
|Tax Filing Status||Modified Adjusted Gross Income|
|Single, head of household, or married filing separately and you don’t live with your spouse at any time during 2017||Up to $133,000|
|Married filing separately and you live with your spouse at any time during 2017||Up to $10,000|
|Married filing jointly or qualifying widow(er)||Up to $196,000|