State-Run Retirement Plan Penalties Proposed

Lawmakers are again considering legislation imposing penalties on employers for not complying with the requirements of the state-run retirement plan.

SB 136 makes a series of changes to the MyCTSavings program, which launched in May, 2022.

Employers with five or more employees—each paid a minimum of $5,000 in the calendar year—are required to join MyCTSavings if they don’t offer a qualified employer-sponsored retirement plan.

Businesses that offer employees a qualified retirement savings option should certify their exemption from the program, which is administered by the Office of the State Comptroller.

Eligible employees are automatically enrolled in the program, with employers required to remit employee plan contributions to the state. Once enrolled, employees can choose to opt out. 

As of February, there were more than 6,300 enrolled businesses with almost 25,000 enrolled employees and approximately $18 million dollars in savings.

Penalties

Under SB 136, a business is noncompliant if it fails to respond to two notifications and a final notice.

The bill proposes penalties each year employers are noncompliant for not less than 90 calendar days after service of the final notice of noncompliance.

Section 7 of the bill features a range of noncompliance penalties:

• $500 for employers with 5-24 employees
• $1,000 for employers with 25-99 employees
• $1,500 for employers with 100 or greater employees

The penalty provisions mirror those included in legislation that passed the state House last year, but was not called for a vote in the Senate.

“Our office seeks reasonable and less severe enforcement mechanisms, in line with the practices of other states with similar programs through the use of reasonable financial penalties,” Comptroller Sean Scanlon testified to the legislature’s Labor and Public Employees Committee.

“Penalties would only be assessed after repeat notifications sent to the business, giving employers ample opportunity to either elect their own private plan or join MyCTSavings.”

Other Changes

SB 136 also proposes other changes to the statutes governing MyCTSavings:

• Reduces the qualifying period for employee eligibility from 180 days to 30 days
• Adds language explicitly stating that no qualified employer shall be a program fiduciary, or be considered to be a fiduciary
• Adds language clarifying that employers are not responsible for the administration, investment, or investment performance of the program
• Adds language stating that employers cannot be held liable with regard to investment returns, program design, and benefits paid to program participants
• Removes requirement that the program maintain a list of qualified private sector retirement services providers

CBIA’s Ashley Zane said that while businesses appreciate language preventing employers from being held liable for the fund’s performance, the proposed noncompliance fees remain a concern.

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For more information, contact CBIA’s Ashley Zane (860.244.1169) | @AshleyZane9.