Restaurants are the top takers for Connecticut’s state-run retirement program known as MyCTSavings, but many businesses have not yet responded or registered for the program, according to numbers supplied by the Connecticut Comptroller’s Office.
Of the 2,222 full-service restaurants listed by the Comptroller’s Office, 545 registered for the program which sets up a Roth-IRA for employees using an automatic deduction from the employee’s paycheck.
But restaurants also had one of the lowest response rates – only 37 percent have either registered or been exempted from the program because they already provide a retirement plan. Although response numbers from restaurants are low, they were more likely to enroll in the program.
Food service businesses, including limited-service restaurants and snack and non-alcoholic beverage bars, took up three of the top eight industries where MyCTSavings has had the most sign-ups. Landscapers, elderly services and child day care services businesses also had high rates of registration but also high rates for exemption and between 40 and 50 percent of those businesses have yet to respond.
Dentists, physicians and lawyers also occupied the top 8 industries and had the highest response rates, upwards of 85 percent, but the vast majority were exempt from participating because they offered retirement plans of their own.
Overall, of the more than 30,000 total employers listed by the Comptroller’s Office, only 58 percent have responded to either enroll in the program or be exempted. Of the businesses that have responded, the majority – 43 percent – were exempted from participation, meaning 15 percent of responders are now participating in MyCTSavings.
And response is matter of state law. Businesses are required to register with the state and either automatically enroll their employees into the program or show that they have a retirement plan already in place, otherwise those businesses could face possible legal action in the form of civil lawsuits following an August 31, 2023, deadline.
Comptroller Sean Scanlon has said he prefers to focus on outreach to businesses, including going on tours around the state stopping into businesses to raise awareness of Connecticut’s program and its requirements, rather than enforcing compliance.
This past legislative session, Scanlon pushed for a bill that would, among other things, have given his office the power to fine businesses for failing to register with the state, rather than filing a civil suit against the business under the retirement program’s existing regulations.
Although the legislation was passed in both the House of Representatives and the Senate, an amendment filed in the Senate sent the bill back to the House where it failed to receive a vote before the legislative deadline, leaving potential lawsuits in place for program enforcement.
The bill would also have allowed the Comptroller to combine resources with other state retirement programs to potentially decrease investment and management fees imposed on employees participating in the program, which can eat into their retirement savings.
According to the latest figures from MyCTSavings, more than 16,000 employees in Connecticut are now contributing to a retirement account through Connecticut’s program, one of many popping up across the country as a means to help workers save for retirement and thus lessen their dependency on state resources in future years.
A report from Pew Trusts, which analyzed retirement income shortfalls and its potential costs for all 50 states, found that Connecticut retirees in 2040 will likely be $5,480 short of the retirement income replacement target of 75 percent of their pre-retirement income.
The study, which marked any retirement income over $75,000 per year as “sufficient,” found that Connecticut’s retirement shortfall was less than the national average but estimated Connecticut will expend $6.5 billion between 2021 and 2040 in public assistance to make up for that shortfall.
“The authors found that this savings shortfall would lead to increased pressure on public assistance programs, reduced tax revenue, and decreased household spending by retirees, while at the same time shifting a growing fiscal burden to a shrinking population of working-age taxpayers,” wrote John Scott and Andrew Blevins.
The report highlighted state retirement savings programs as one way to address insufficient retirement savings.
Although employees in registered businesses that do not provide a retirement plan are automatically enrolled in MyCTSavings, they can opt out of the savings plan. According to the figures, nearly 19 percent opt out within the first 30 days.
On average, each saver in MyCTSavings has thus far accumulated $422 through a roughly 3 percent payroll deduction, amounting to $6.8 million in total assets by the end of June, a $1.5 million increase over the course of one month.