Connecticut Secure Retirement Plan
On May 7, 2014, the Connecticut General Assembly passed a “budget implementer” bill that includes provisions to lay the groundwork for a new state-administered retirement savings plan for private-sector workers who do not have an employer-provided pension or retirement savings plan. The bill allocates $400,000 toward the establishment of a Connecticut Retirement Security Board and directs the Board to conduct a market feasibility study and create a comprehensive implementation plan for the new retirement program.
The Retirement Board, in consultation with diverse stakeholders, will study and develop a portable automatic Individual Retirement Account program to increase participation among Connecticut residents. If determined feasible, the plan would include these features:
- Automatic enrollment: Employers who do not offer a retirement plan and have five or more employees would enroll their employees into the program through a payroll deduction mechanism, unless the employee opts out. Employers would not have any fiduciary responsibility for the funds and their only responsibility is to send their employees’ money through payroll deduction.
- Default contribution level: The board will establish a default contribution rate for the plan, but employees will be able to affirmatively choose to increase or decrease that amount.
- Low administrative costs: The basic costs of running the plan will be set by the board, limited to a predetermined percentage of plan assets.
- Lifetime payouts and survivor benefits: Upon retirement, workers will receive their benefits as a lifetime stream of income, unless they select a lump-sum payout. Provisions will be made for spousal benefits and a preretirement death benefit that can be bequeathed to a worker’s heirs.
- Guarantee: The Board is charged with establishing an annual guaranteed rate of return, backed by insurance, to ensure worker’s savings will continue to grow.
In addition, the legislation requires that the plan will be totally separate from the state’s retirement funds, that it not be subject to ERISA, the federal private pension law, but that the plan must be in compliance with any other applicable laws, rules and regulations.
The legislation requires that all appointments to the Connecticut Retirement Security Board be made by July 31, 2014. The Board is required to report the results of the market feasibility study to the Governor and appropriate committees of the General Assembly by January 1, 2016. The Board must submit an implementation plan to the Governor and the General Assembly for final consideration by April 1, 2016.
For more information on state-administered retirement plans for private-sector workers, see this fact sheet.
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