Problematic Connecticut Coverage Proposal Withdrawn

Last week, a harmful provision that could have extended Connecticut’s state-run retirement coverage mandate to ERISA plans was dropped from the bill reported out of committee.

The move follows March 8 testimony in Connecticut by the American Retirement Association on the harmful effects the proposal could have, as well as the launch of a grassroots lobbying campaign by NAPA and its sister associations.

Specifically, the proposal would have extended the retirement coverage mandate to all employers, even those who already sponsored an ERISA qualified retirement plan to employees not required to be covered under ERISA, including employees 19 years of age or older, employees employed for at least 120 days, and employees who either are reasonably expected to complete 1,000 hours of service in a calendar year; or have completed at least 500 hours of service for the employer in the past two consecutive calendar years.

In 2014, the Connecticut legislature created the Connecticut Retirement Security Board and it raised nearly $1 million in mostly private funds to conduct a market feasibility study. The Connecticut Retirement Security Board released a report in January that found a public retirement program would need approximately $1 billion in assets to become financially self-sustaining. If one-third of those eligible to enroll in the program did so and contributed up to 6% of their earnings, then the program should be self-sustaining at the end of Year 2. However, the bill reported out of committee changed the default contribution rate to 3% of pay which should increase the timeline for the state program to become self-sustaining.

Marketplace, Not Mandate

Meanwhile, a trio of Republican senators said they don’t believe Connecticut should create a public retirement system that would require private-sector employees to contribute to a retirement plan through a payroll deduction.

Instead, CT Mirror reports that Senate Minority Leader Len Fasano and Sens. L. Scott Frantz and Toni Boucher are pushing for a marketplace option that would create a one-stop shop for small businesses to search for IRAs or other types of retirement plans for their employees. Fasano says the plan is modeled on similar legislation in the state of Washington, which dedicated $524,000 over two years to implement the initiative.

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