Troubled State-Run Retirement Plan Faces Uncertain Future
The future of Connecticut’s troubled state-run retirement plan is in doubt following suspension of all financial expenditures.
The Connecticut Retirement Security Authority’s board of directors unanimously voted to suspend spending during a specially convened Christmas Eve conference call.
CRSA executive director Mary Fay was also directed to “compile an accounting of any incurred and unpaid bills for services on behalf of the authority.”
That action followed a chaotic Dec. 20 board meeting, where it was revealed CRSA would run out of money by the end of January.
A representative from the state Office of Policy and Management—the governor’s budget office—told the board the Lamont administration opposed providing a $1 million line of credit detailed in the 2016 legislation that created the program.
The board was told OPM head Melissa McCaw “is not supportive of tapping a line of credit…but she is very interested in keeping the mission alive.”
That 2016 legislation, which narrowly passed the legislature, gave OPM discretion over providing the line of credit.
“If I were a venture capitalist, I would say we’re out of business,” CRSA board member Thad Gray said, likening the situation to an early stage startup company.
The proposed retirement plan—now two years past its original 2017 launch date—was supposed to be managed without using taxpayer funds.
The legislation mandates that businesses with five or more employees automatically enroll any full- or part-time workers not eligible for an employer-sponsored retirement plan in a new state-run plan.
Employers are required to deduct 3% of a worker’s salary each pay period and transmit it to the state for deposit.
CBIA and other business organizations opposed the mandate, noting the state was entering an industry and giving itself an unfair advantage over private sector firms.
CBIA’s Eric Gjede said the state plan was also not worker-friendly, as it would not offer all the tax benefits of private sector plans, did not comply with federal consumer protection laws, and required employees to opt out each year, in writing.
“Private sector retirement plans are readily available to all workers today in Connecticut,” he said.
“And unlike the state’s proposed plan, those plans take contributions before taxes, are solvent, and comply with the Employee Retirement Income Security Act.”
Gjede said expanding the size and cost of state government was not an effective way to boost retirement savings.
“There is no question that many Connecticut residents are not saving enough for retirement,” he said.
“However, policymakers should work with what already exists in the marketplace and help residents understand the value of saving for retirement.”
During the Dec. 24 conference call, CRSA board member Christine Shaw called the suspension “a pause in the initiative so that the Comptroller’s Office, Treasury, and OPM could meet to see if their respective offices could provide staff resources while the board resets to identify a sustainable business model and possibly explore forming a partnership with an existing and sustainable organization.”
EXPLORE BY CATEGORY
Stay Connected with CBIA News Digests
The latest news and information delivered directly to your inbox.