State-Run Retirement Deadline Nears
Connecticut employers have until Aug. 31 to register or opt out of the state-run retirement plan.
Employers with five or more employees—each paid a minimum of $5,000 in the calendar year—are required to join MyCTSavings if they don’t offer employees a qualified employer-sponsored retirement plan.
Comptroller Sean Scanlon announced Aug. 3 more than 11,000 businesses recently became eligible and should have received notices to register.
Scanlon said his office also sent notices to businesses who have not yet registered.
The program had more than 4,600 businesses registered as of Aug.1, according to the Office of the State Comptroller.
The program has enrolled more than 17,000 employees and has more than $8 million in assets.
While there currently is no penalty for not complying with registration requirements, Scanlon said earlier this year that the state legislature is considering a proposal imposing “a small penalty.”
“At the end of the day, we don’t want to get to that point,” he said. “We want to work proactively with businesses.”
Qualified employer-sponsored retirement plans include those under Internal Revenue Code sections 401(a) (including a 401(k) plan); qualified annuity plan under section 403(a); tax-sheltered annuity plan under section 403(b); Simplified Employee Pension plan under section 408(k); a SIMPLE IRA plan under section 408(p); or governmental deferred compensation plan under section 457(b).
Qualified, employer-sponsored plans do not include payroll deduction IRAs.
Eligible employees will be automatically enrolled in the program. Once employees are enrolled, they can choose to opt out of the program.
By default, employees who are enrolled will see a 3% deduction from their gross pay, but they can choose to manually adjust their contribution rate at any time.
As a Roth IRA, the state-run plan does not provide the pre-tax benefits of other retirement plans offered by numerous private sector institutions.
In addition, the state plan is not subject to the federal Employee Retirement Income Security Act, which sets minimum standards for most retirement and health plans to protect enrolled individuals.
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