More than 18,000 small businesses in Connecticut have not yet registered for the state’s retirement program ahead of a March 30 deadline, according to numbers from the Comptroller’s Office.
The Comptroller’s Office, charged with administering Connecticut’s MyCTSavings program which automatically enrolls workers who don’t have access to an employer-sponsored retirement plan into a Roth-IRA retirement savings plan, has been reaching out to Connecticut’s small businesses through mailings.
Similarly, Vestwell, the company in charge of managing the retirement accounts, has been placing advertisements on television, radio and internet, per their contractual obligation.
The latest tranche of mailings went out in January to over 22,000 small businesses in Connecticut. Businesses must register with the state and indicate whether they have a retirement plan for their employees.
Those that do are exempted from the MyCTSavings program, while those that don’t will have to provide employee information to the state and begin an automatic payroll deduction into the MyCTSavings program. Workers can opt out of the program if they choose.
Thus far, 5,944 businesses were exempted from the program because they already have a qualifying retirement plan, but 18,383 have not yet registered with the state. Businesses that fail to register could face penalties in the future through regulations or legislation currently being considered in the General Assembly.
State Comptroller Sean Scanlon has repeatedly emphasized that he wants to work pro-actively with businesses to avoid the need for any penalties.
To date, 1,253 small businesses have enrolled in the state program, which is still in its infancy, and 8,319 employees have begun saving for retirement through the program, amounting to $2.4 million in assets, a little less than $300 per enrolled employee.
Savers who continuously contribute into the program over the course of a careers could potentially save anywhere from $250,000 to more than $600,000 by the time they retire. Advocates see the program as a way to help residents provide for themselves in retirement, supplement social security and avoid going on social assistance programs.
Connecticut’s MyCTSavings program is part of a nationwide trend by states to create retirement savings program for employees who may not have access to traditional employer-sponsored plans. Connecticut was one of the first three states, along with California and Oregon, to create the program but was much slower to get it launched.
Larger states like California and Oregon have amassed hundreds of millions in assets through their programs.
But now, with many states implementing similar programs, Scanlon indicated during testimony that state like Maine and Delaware are looking to partner with Connecticut to share administrative costs, grow the size of the invested assets and potentially lower some of the costs and fees associated with the programs.
Businesses, however, also have options outside of MyCTSavings if they don’t already have a retirement plan. The Secure Act 2.0 passed by Congress in December of 2022 provides tax credits to cover the costs of a 401(k) plan.
Employees can also open their own Roth-IRA accounts through various financial institutions. MyCTSavings offers the convenience of a payroll deduction and simpler investment options, but also comes with higher fees for the service.
Only businesses with 5 or more employees are required to register and businesses do not pay into the program, only employees. Employers can register on the MyCTSavings website.