Citing statistics that Connecticut's private-sector workers are not saving enough for retirement, the House this week approved a bill that will save them less than they could with a traditional 401(k) and saddle employers with more costs and administrative burdens.
And all of this to force fit Connecticut employers with a shaky, state-run retirement savings scheme.
HB 5591 passed the state House of Representatives on a 76-62 vote with 12 members absent or abstaining.
The bill requires businesses with five or more employees to incur the time and expense of automatically enrolling any part-time or full-time employees not eligible for an employer-sponsored plan into the state’s plan.
CBIA and more than 70 of the state’s business organizations and chambers of commerce are now urging Connecticut state senators not to follow the House down this path and instead reject HB 5591.
Under the bill, it will become and employer's job to “sell” the state plan to their employees, forcing them into a scheme that sounds like a 401(k) plan--where they not only save, but reap the benefits of of pre-tax income being squirreled away--but in fact is a more expensive scheme.
Here's why: On its way through the legislative process, it turned out that the bill would cost the state $10 million per year for the state to administer, so the House wrote a bill that creates a Roth-like IRA--the government gets its cut of your employees' money up front, masking the cost it will incur trying to compete with the myriad private sector retirement plans that are a much better deal.
It's the classic legislative bait-and-switch. Employees get no tax-deferred savings and lose more money from their retirement fund to pay for the plan.
- No tax-deferred retirement savings benefit for the mandatory 3% contribution deducted from their paychecks
- More money taken out of their hard-earned retirement dollars to fund a new quasi-government bureaucracy.
In other words, supporters of this bill want your employees to save--but not as much as they could.
The bill is a knock against employers, a bad deal for employees, and could cause the loss of private-sector jobs in the state.
What’s worse, this new plan will directly and unnecessarily compete against Connecticut’s private-sector businesses selling retirement plans.
The state’s financial services sector provides good paying jobs for tens of thousands of people in Connecticut.
In establishing this new, state-run default retirement plan, HB 5591 effectively muscles the state into the financial services industry and helps push private-sector businesses and their proven—and better—retirement products out of the market.
Despite their superior expertise and retirement savings products, it’s not hard to figure out what will happen to the people making their living selling retirement plans once the market is taken from them by the state.
Connecticut can’t afford to lose any more businesses–especially when it is completely avoidable.
CBIA urges members of the Connecticut State Senate to reject HB 5591 as too costly for Connecticut’s workers and economy.
Lawmakers might be better advised to host a "Retirement Savings Day" at the Capitol, bring in the state's vibrant financial services industry, and let them do what they do best: provide Connecticut citizens with plans that let them pay less taxes and save more money.