Is investing Connecticut workers' retirement savings in an Oregon state-run program the answer to salvaging a 2016 mandate on businesses?

The Connecticut Retirement Security Authority's board of directors considers that an option as it attempts to salvage the state's troubled, much-delayed program.

Connecticut's program faces an uncertain future following the CRSA board's decision to suspend spending during a specially convened Christmas Eve conference call.

That action followed a chaotic Dec. 20 board meeting, where it was announced the authority would run out of money by the end of January.

A representative from the state Office of Policy and Management told the board the Lamont administration opposed providing a $1 million line of credit detailed in the 2016 legislation that created the program.

In a follow up meeting this month, the board voted to lay off executive Mary Fay and provide her with a limited severance package. 

Options

The board discussed two options for salvaging the plan: securing a financial bailout from the Connecticut legislature, or joining Oregon's state-run retirement plan, called OregonSaves.  

Both options have ramifications for Connecticut taxpayers. 

Launched in 2017, OregonSaves is similar in design to Connecticut's proposed program and will ultimately apply to employers with four or less employees by Jan. 2021.

Oregon charges up to 1.05% of worker contributions for administering its state-run retirement plan.

[Connecticut's mandate requires businesses with five or more employees automatically enroll any full- or part-time workers not eligible for an employer-sponsored retirement plan in the state-run plan.]

Like Connecticut's proposed plan, OregonSaves takes employee contributions—5% of salary, Connecticut would deduct 3%—after taxes are deducted.

OregonSaves also charges up to 1.05% of worker contributions for administering the plan.

Partnership

Unlike Connecticut, Oregon employers can file for exemptions from the program if they offer an employer-sponsored retirement plan to some, but not all employees.

While no other states currently partner with OregonSaves, the program's director told the Hartford Courant a partnership with Connecticut was "possible."

If Connecticut joins the OrgeonSaves program, that would shift potentially millions of dollars in retiree assets to Oregon and away from Connecticut.

It is also counter intuitive to invest more taxpayer dollars into Connecticut's plan when so many unresolved legal and logistical issues remain. 

Not to mention that Connecticut private sector plans are readily available and unlike the proposed state-run plan, take contributions before taxes, are solvent, and comply with federal consumer protections.

Ignored Opportunities

The most disappointing aspect of Connecticut's four-year retirement plan odyssey is the wasted expense and effort, all of which could have been avoided.

Connecticut ignored opportunities to partner with the retirement industry and business community to promote and educate workers about the importance of saving for retirement.

Connecticut has pursued a mandate that offers workers an inferior product and unnecessarily burdens businesses.

Instead, the state pursued a mandate that offers workers an inferior product, unnecessarily burdens businesses, and creates an unfair playing field for private sector financial services firms.

As Forbes magazine noted in a 2017 article about OregonSaves:

If your state government decided it was necessary to increase access to food by creating a food truck service, would it be a success if the product was fast food dollar menu quality at a markup of nine times the cost, with a fraction of the selection, and similar in price to the cost of a personal chef?