There’s much to accomplish in the coming months, but overseers of a state-created retirement plan for private-sector employees hope to begin enrolling at least some Connecticut workers by January, a year later than originally hoped.
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There's much to accomplish in the coming months, but overseers of a state-created retirement plan for private-sector employees hope to begin enrolling at least some Connecticut workers by January, a year later than originally hoped.
The Connecticut Retirement Security Authority (RSA) has been meeting for nearly a year and ultimately aims to raise $1 billion in assets by enrolling an estimated 600,000 Connecticut residents who don't have access to an employer-sponsored retirement plan.
The state plan aims to aggregate a large number of participants to become an attractive prospect for plan providers and leverage better pricing.
There are plenty of challenges to get there. First, employees would be able to opt out. In addition, the minimum payroll deduction would be 3 percent instead of an originally envisioned 6 percent. Finally, negotiations between lawmakers resulted in the program being limited solely to Roth IRA accounts. Many of the targeted enrollees likely earn low or modest incomes, and Roth IRAs, since they accept post-tax deposits, allow penalty-free withdrawals of principal at any time. All of that could present headwinds for reaching the program's targets.
“[2019] is bearing down on us pretty quickly,” said RSA board member and State Comptroller Kevin Lembo, who was one of the fiercest advocates for creating the Retirement Security Authority, convinced that a greater urgency on retirement savings was needed and that private-sector financial providers were failing a large segment of the population.
Two of the biggest tasks ahead include hiring an executive director and selecting financial services vendors.
RSA Chairman Scott Jackson, the former labor commissioner who was recently named tax commissioner, said that the board identified an executive director finalist in May, but negotiations remain ongoing. Delays have been a common theme for the RSA, which narrowly won legislative approval in 2016 after being assailed by business advocates. It was supposed to begin work in early 2017, but Gov. Dannel P. Malloy waited until about August to appoint Jackson as chairman.
In the interim, a worrisome federal labor rule change last March threatened to throw a wrench in the works of state-sponsored retirement plans, potentially forcing plans to comply with more onerous federal rules.
But after consulting with an attorney, the RSA isn't as concerned about the federal rule change as it once was, Jackson said. Meantime, both Jackson and Lembo take a measured view of their pace of progress thus far.
“I think most of us who spent time in the planning or analysis of ... these programs ... understood the complexity of them, so I don't think there are any surprises there,” Lembo said. “Starting up a program like this is a big deal. It's complicated and there are lots of layers of law you have to be aware of.”
