Failure to Launch: State-Run Retirement Plan Inches Forward

Issues & Policies

Implementation of Connecticut’s controversial state-run retirement plan is still inching forward—almost two years after the original launch date.

Connecticut lawmakers in 2016 narrowly approved legislation mandating that businesses with five or more employees automatically enroll any full- or part-time worker not eligible for an employer-sponsored retirement plan in a new state-sponsored plan.

Employers are required to deduct 3% of a worker’s salary each pay period and transmit it to the state for deposit. 

Workers not interested in the state-run plan—which will not offer all the tax benefits of private sector plans—must opt out each year, in writing.

The plan was supposed to be fully implemented by Jan. 1, 2018, but was delayed as a result of a reversal of a U.S. Department of Labor ruling.

Proponents of the program decided to move forward with the planning process despite legal challenges to similar plans in other states, including California.

The U.S. Justice Department recently made headlines when it submitted briefs in opposition to California’s state-run plan.

Many Plans, One Vendor

This year, Connecticut lawmakers inserted language into the new state budget that added further controversy—requiring multiple plans as originally intended, but now from only a single vendor.

That contradicts then-Governor Malloy’s insistence in 2016 that the plan offer participants multiple options from multiple vendors to ensure competition among retirement plan providers.

Workers not interested in the state-run plan—which will not offer all the tax benefits of private sector plans—must opt out each year, in writing.

Despite the legal obstacles, the Connecticut Retirement Security Authority placed a notice in the Nov. 5, 2019 Connecticut Law Journal, signifying its intent to adopt several operating procedures and seeking public comment.

The notice lists the procedures but indicates that more information is only available by emailing the authority’s executive director, Mary Fay.


Here are the seven procedures:

  1. Adoption of Annual Budget and Plan Operations. Requires the adoption and approval of an annual budget. 
  2. Compensation and Benefits. Details the benefits that can be offered to potential employees, like desirable salaries, incentive compensation, vacation time, sick days, group health, life and disability insurance, and more. 
  3. Hiring and Promotion; Discipline and Termination.
  4. Equal Employment Opportunity and Affirmative Action.
  5. Using Surplus Funds. Allows the authority to pay back the money it borrowed from the General Assembly, despite that no taxpayer dollars were to be used to create this program. Also allows the authority to apply these funds, which are actually participants’ retirement savings, towards future authority budgets or to augment the authority’s reserve accounts. 
  6. Making Modification to the Program. This section allows CRSA to make additional changes to the program without lawmakers’ approval, unless a change in the enabling statute is also required. 
  7. Disclosure of Third Party Fees by Person or Entities Providing Investment Services.  

Although the mandate may only be months from full implementation, the business community continues to oppose Connecticut’s state-sponsored retirement plan because it’s another example of government entering into an industry and giving itself an unfair advantage over the private sector.

Connecticut’s requirement that anyone without an employer-sponsored plan be automatically enrolled in the program will cut out competitors and force state residents into investing their retirement savings through a quasi-public agency that uses Gmail accounts for official communications.

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


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