A bill that will require thousands of Connecticut businesses to provide their employees with access to a state-administered retirement plan has been raised by the legislature’s Labor Committee.
Under the proposal, any business not already giving employees access to a 401(k), IRA or pension plan will have to participate in the state program.
Although the committee voted to raise the bill, a bill containing all the details hasn’t been filed yet. However, all indications are that the proposal will match one that failed in the final days of the 2013 session.
Proposals like these are reasons why Connecticut often scores low in national rankings for the costs of doing business, state fiscal condition, and overall business-friendliness.
In a state known for its strong financial services industry and robust marketplace for retirement savings plans that anyone can access, mandating businesses to use a state-run program makes little sense.
So far, it’s likely that the proposal will not require an employer contribution to the state-administered IRA plan. Yet employers will face new administrative costs for employee payroll deductions into the plan, and they will have to host periodic open enrollment periods for employees.
A state-administered plan would directly compete with Connecticut’s vibrant marketplace of retirement plan and investment options. Many of these products are easy to find—in employees’ local banks, for example, and in a variety of other ways. These private-sector plans also help support thousands of Connecticut jobs.
Last year’s proposal did not answer the question of liability for plan shortfalls. If the proposal exempts the state from any financial liability, who will be left to foot the bill for the plan participants? In all likelihood, state taxpayers will be on the line – much like they are on the line for the state employee pension plan – currently one of the most unfunded public pension plans in the country.
Although the language for the proposal has yet to be seen, any proposal that includes an employer mandate or competes and endangers private sector jobs is bad for Connecticut.