State Aims to Compete for Retirement Plan Business
Businesses that offer retirement savings plans to private-sector employees will have to compete with a taxpayer-subsidized state plan under a proposal (SB 54) now in the Senate.
Ironically, as Connecticut struggles to create jobs, SB 54 would pit the state directly against its own businesses and economy. There already is an excellent marketplace in the state for low-cost retirement planning products.
The proposal also is likely to be costly and financially risky to the state and could negatively impact Connecticut’s small businesses.
Small Business Impact
Under SB 54, any business of five or more employees that does not currently offer a retirement plan has to allow their employees to participate in the state’s retirement plan.
Thousands of small businesses in Connecticut will each face new administrative and recordkeeping obligations and costs if just one employee in the company opts into the state plan.
The bill also establishes a government-appointed Connecticut Retirement Security Trust Fund Board to run the state plan and, among other things, find ways to require employers to contribute to it in the future.
No Other State
If SB 54 is adopted, Connecticut will be the first state in the nation to implement a state-run retirement plan for private-sector workers.
There are good reasons other states have walked away from the idea, including:
- Costs: A study conducted by Washington state estimated the startup cost for a similar plan there would be $1.8 million.
- Risks: Making the state a retirement plan fiduciary would expose it to significant legal liabilities if any mistakes are made. The plan also would have to be subject to all the complex federal rules and audits that private-sector retirement specialists must assume.
- Taxpayer Burden: Connecticut taxpayers could be responsible for any shortfalls in the plan if the investments fail to cover the plan’s guaranteed rate of return and ongoing administrative costs.
Plus, Connecticut doesn’t exactly have a great track record with its state employee pension plan—it’s one of the most underfunded in the nation.
By setting up the state to compete with Connecticut businesses—the state is home to many of the nation’s top financial services firms—SB 54 openly contradicts the slogan “Connecticut is open for business.”
Connecticut’s financial services sector employs tens of thousands of residents in many facets of the business. And companies here offer low-cost retirement products and services to employees in the private sector on both a group and individual basis.
Why would the state jeopardize those jobs by offering the same product, but expensively subsidized by taxpayers?
CBIA urges lawmakers to reject SB 54 as unnecessary, costly, and counterproductive to the state’s economy.
For more information, contact CBIA’s Eric Gjede at 860.244.1931 or email@example.com.
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