Despite numerous stumbles and continued opposition from the business community, regulators are now targeting a Jan. 1, 2019 launch date for the state's controversial retirement plan mandate.

That marks a 12-month delay for rolling out the plan, which the state legislature narrowly approved in 2016 with Lt. Gov. Nancy Wyman's vote needed to break a tie in the Senate.

The mandate forces businesses with five or more employees to enroll any full- or part-time worker not eligible for an employer-sponsored plan into a separate plan administered by the Connecticut Retirement Security Authority.

Architects of the mandate argued that private sector workers were not saving enough for retirement.

Rather than encourage greater participation in private sector 401(k) retirement plans, they created a plan that offers no tax benefit to employees—unlike private sector plans, which are readily available to all workers.

The legislation mandates employee contributions at 3% of salary, but deducts that from wages after taxes, with those contributions used to fund the bureaucracy needed to administer the plan.

Obstacles

The authority has faced a series of obstacles.

CRSA members only met for the first time in August last year and three months later postponed the plan roll out indefinitely.

In May 2017, the U.S. Congress overturned an Obama-era regulation that allowed states to manage retirement plans without complying with consumer protections governed by the Employee Retirement Income Security Act.

That meant Connecticut needed to comply with the same costly but important consumer safeguards ERISA requires for private sector plans.

However, CRSA chair Scott Jackson, the Department of Revenue Services commissioner, told the Hartford Business Journal this week that after consulting with attorneys, the authority's concerns with the rule change have diminished.

Funding Issues

CRSA's efforts were also undermined by a lack of start-up funding, compounded by a legislative prohibition against borrowing from taxpayers.

Further, the state plan is required by law to offer options from multiple vendors.

The authority has chosen novel interpretations of state law to get around those requirements.

CRSA is also dancing around the multiple vendor requirement, arguing that offering multiple plans from a single vendor addresses the spirit of the law.
To fund start-up operations—including hiring an executive director, legal costs, management and consultant fees, and bonding and insurance—board members initially targeted funds from the $400,000 lawmakers appropriated years ago to study a state-administered retirement plan.

Despite the questionable notion of raiding one-time funds intended for another purpose, the authority approved a memorandum of understanding to access that money.

One board member also suggested CRSA could fund operations more quickly by doubling the mandated employee contribution from 3% to 6%.

Taxpayer Dollars

CRSA then successfully lobbied lawmakers to add a provision in legislation enacted in the final hours of the 2018 legislative session, allowing the authority to borrow up to $1 million from the general fund to cover start-up costs.

In other words, CRSA appears to have sidestepped the legislation's ban on using taxpayer dollars by borrowing money from the state's general fund.

The authority is also dancing around the multiple vendor requirement, arguing that offering multiple plans from a single vendor addresses the spirit of the law.

Businesses remain concerned about complying with this costly, burdensome mandate.

Those concerns are only heightened by the constant delays, lack of clarity, and the CRSA's interpretations of federal and state law.


For more information, contact CBIA's Eric Gjede (860.480.1784) | @egjede