Top 10 Reasons to Say No to the Retirement Plan Proposal
There are so many reasons why a proposed mandate that businesses offer their employees a state-run retirement plan is harmful to Connecticut that a coalition of more than 40 business organizations representing thousands of employers in the state are opposing it.
To recap, SB 249 requires businesses (with five or more employees) that do not offer their employees access to a 401(k), IRA, or pension plan to facilitate access to a newly-created state-run retirement plan that will directly compete with private-sector businesses in Connecticut.
Why say no to SB 249? Here are the top 10 reasons:
10. Puts a state program in direct competition with Connecticut’s financial services sector–businesses that employ more than 100,000 Connecticut residents. For a state still trying to recover from the recession, that’s a negative economic message.
9. Good for thee, but not for me: Implementing a state-run retirement plan is a top priority for organized labor – except that they carved themselves out of the bill.
8. There’s no evidence that a state-run plan will be administered at lower cost than what is currently available in the private market. Many private-sector retirement plans, for example, are available for fees as low as $50 a year.
7. Hides the cost to the state: Proponents amended the bill so the proposal creates a Roth IRA plan, which means the state will get participants’ income tax revenue up front but the long-term fiscal impact to the state will be hidden in the out years.
6. We’ll be alone: No other state has such a plan and many have rejected it this year, including Arizona, Indiana, Maryland, Maine, Minnesota, Ohio, Washington, West Virginia, and Wisconsin. California is extensively studying a similar proposal, but it may never be implemented because of financial and legal concerns.
5. Could put state taxpayers on the financial hook because SB 249 promises a guaranteed rate of return for plan participants—without saying how that promise will be backed. Will taxpayers be made to ante up?
4. Already broke: The proposal acknowledges that the program won’t be self‐sustaining when it launches, and that the cost for the state to run the program may exceed what the proposal budgets.
3. President Obama got there first: The president recently established, by executive order, the myRA program that allows private sector workers to set up a retirement savings account—but his program doesn’t create a mandate on businesses.
2. Wrong direction: Other states are removing mandates and lifting administrative burdens on employers, but this bill adds more. Connecticut employers will face new management and recordkeeping costs of additional payroll deductions and payment transfers; and they will have to deal with all aspects of employee enrollment and mandated biennial open enrollment periods.
And the top reason to vote no on SB 249:
1. Makes Connecticut less competitive: Several nationwide surveys have portrayed Connecticut as a less than desirable place to do business. (CNBC: Connecticut is #45 overall, #43 in cost of doing business.) Becoming the first state to implement this mandate will continue that “bad for business” perception. Adopting SB 249 would be an unforced error with damaging consequences to businesses in Connecticut and to the state’s economic climate.
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