The state’s Retirement Security Board has issued a report showing mixed support from business for the creation of a retirement program to offer private-sector workers in Connecticut currently without access to workplace savings.
The Boston College Center for Retirement Research (CRR) led an investigation into how employers in Connecticut would react to the proposed state-sponsored retirement savings program.
The report found small employers in Connecticut agreed that their workers are not saving enough for retirement but had many questions and concerns about the state getting involved. Employers welcomed action if it involved compensation from the state to help offer a plan or cheaper/better retirement savings options for their workers.
But a mandate to offer a retirement savings plan (or to enroll employees in a state program) was perceived to result in increased costs to employers to comply with new regulations, facilitate payroll deduction, and educate employees. Employers also thought the state was unable to manage money or run operations efficiently compared to the private sector and worried the program would be run similarly to the state pension system.
Finally, employers questioned the value added by a state-sponsored program relative to the options currently available to employers.
As foreshadowed by the focus groups, a phone survey conducted by CRR showed that employer support for the program was mixed: 38 percent supported it while 48 percent opposed it.
Employers who supported it tended to do so because it does not require a match and wouldn’t require them to have legal responsibility for contributions.
Opposition was driven by the feeling that any state-run program would fail or by an ideological opposition to a state mandate on retirement savings, either for employers or employees.
These findings suggest support can be increased by presenting the program as:
- voluntary for employees;
- easy to administer; and
- private sector run but with state oversight.
The report said the “good news” is that few employers translated their opposition to the program into a desire to encourage their employees to opt out – fewer than 10 percent of respondents said they would do so.
One additional concern of the state, according to CRR, was that the small employers affected by this policy will face difficulty administering payroll deductions for the program. The employer survey suggested this outcome is unlikely.
About half of employers without a plan outsource their payrolls to a provider, most commonly ADP or Paychex, which should make managing an additional deduction both easy and low cost. Second, among employers that manage their own payrolls, opposition is just slightly higher than for employers that outsource (49 vs. 46 percent).
