🔒Employers now face fines for not enrolling employees in CT retirement savings program

A new state law imposes fines of up to $1,500 on employers who fail to enroll their eligible employees in the state’s retirement savings program. Senate Bill 1221, now Public Act 25-30, took effect July 1, and made several changes to the Connecticut Retirement Security Program, known as MyCTSavings. The program was created by the state legislature in 2016 and fully launched in 2022. MyCTSavings provides a Roth individual retirement account (IRA) for any employee who isn’t offered a retirement savings plan by their employer. To qualify, an employer must have a minimum of five employees, at least five of whom are paid more than $5,000 per year. The Office of the State Comptroller, which administers MyCTSavings, said Monday that 7,518 businesses have enrolled 32,772 employees, allowing them to save more than $45.8 million through the program. SB 1221, which was approved along party lines in both chambers of the legislature and signed into law by Gov. Ned Lamont on June 9, makes four changes to the existing law:

• It extends the program, as of July 1, 2026, to cover personal care attendants (PCAs) who provide care under a state-funded program, making an estimated 12,000 more people eligible.
• It ties the program’s default contribution rate to federal law for participants who enroll on or after July 1, 2025. Federal law requires a default contribution rate of between 3% and 10% in the first year and then to increase by one percentage point each year until it is at least 10% but not more than 15%. Employees can choose a different contribution amount.
• It allows the comptroller to provide an applicable retirement saving vehicle for participants who receive a federal Saver’s Match contribution, and
• It creates a notice requirement and financial penalty for non-compliant employers.

The notice requirement and financial penalties replace the existing law, which stated that if a qualified employer failed to enroll eligible employees in the program, the state labor commissioner or comptroller could sue that employer to require compliance and recover the costs and attorney’s fees. The new law instead requires the comptroller to send up to three notices of noncompliance, and then to assess a civil penalty if the employer remains noncompliant within 90 days after the final notice is received. The civil penalties are based on the size of the employer:

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

In testimony provided for a public hearing held by the Labor and Public Employees Committee on Feb. 6, state Comptroller Sean Scanlon said it is easy for employers to avoid any penalties if they don’t offer their own retirement benefit. “All the business needs to do is tell our office the names of their employees,” Scanlon said. “We then create Roth IRA accounts for each employee and it’s up to them whether they want to start saving or not. All we ask of the employer is that they add the payroll deduction to the employee’s check. That’s it. We do all the rest and there is no fee to the business for participation.” The change for the federal Saver’s Match Program (SMP) seeks to help low- and moderate-income workers. Starting in 2027, the federal program will generally provide a federally funded contribution to a qualified retirement plan, but Roth IRAs, which the state program provides, are not eligible for those contributions. For state participants who receive an SMP contribution, the updated state law requires the comptroller to provide an applicable retirement savings vehicle that can receive the contribution.