The state’s beleaguered pension scheme finally launched this month, more than four years after its originally scheduled launch date.
The Connecticut Retirement Security Authority, overseen by the Office of the State Comptroller, officially launched MyCTSavings on March 24, with a New York-based company serving as the program’s third-party administrator.
Connecticut employers with five or more employees — each paid a minimum of $5,000 during the calendar year — are required by law to join the program if they don’t offer employees a retirement plan.
Covered employers must register with the state by June 30, 2022, October 31, 2022, or March 30, 2023, depending on the size of the business (see table above).
Employers who offer employees qualified pension plans are exempt from participation, but must still certify this exemption.
Qualified employer-sponsored retirement plans include those governed by Sections 401(a) of the Internal Revenue Code (including a 401(k) plan); qualified annuity plan under section 403(a); tax-sheltered annuity plan under section 403(b); Simplified Employee Retirement Plan under Section 408(k); a SIMPLE IRA plan under section 408(p); or government deferred compensation plan under section 457(b).
Qualified employer-sponsored plans do not include payroll IRAs.
Eligible employees will be automatically enrolled in the program with a default deduction of 3% from gross pay.
Once enrolled, employees can choose to opt out of the program or adjust their contribution rate at any time.
An employee’s retirement account is portable. If they change jobs, their account follows them.
The plan requires covered employers to:
- Provide the program administrator with employee names, social security or tax ID numbers, dates of birth, addresses, and email addresses
- Create payroll deductions for employees and remit employee contributions to the program administrator
- Review employee contribution and withdrawal decisions before each payroll submission
- Add new employees and remove old employees if needed
No pre-tax benefit
There are no employer fees and employers are neither required nor permitted to contribute to the program.
Employees must work for a covered employer for at least 120 days to be eligible for the state-run plan. They must also be at least 19 years old.
Once enrolled, employees manage most account functions online and are responsible for communicating directly with the plan administrator regarding their investments.
As a Roth IRA, the state-run plan does not provide the pre-tax benefits of other retirement plans offered by many private sector institutions.
In addition, the state plan is not subject to the federal Employees Retirement Income Security Act, which sets minimum standards for most pension and health plans to protect enrollees.
MyCTSavings is structured as an individual payroll retirement account and does not need to be reported on an employee’s W2.
The IRA administrator for the MyCTSavings program will file Form 5498, IRA Contribution Information with the IRS and send a copy to the employees.
CRSA’s FAQ sheet provides detailed information for employers and explains how they should handle employee questions regarding their selections.
The CRSA said it will monitor companies’ compliance, noting that “if a company is non-compliant and fails to register, an investigation may take place and penalties may be applied.”
“Failure to remit deductions in a timely manner violates Connecticut law, including wage and hour requirements,” the authority warned. “The state can impose penalties for these violations.”
The state sends explanatory materials to employers, via email and USPS, including access codes to register or apply for an exemption.
However, many employers say they received state mail in March containing incorrect or misleading information, including notices warning that they missed registration deadlines and face penalties.
It’s not the first stumble for the plan, which was narrowly approved by the state legislature in 2016 and has suffered a series of setbacks over financial, legal and personnel issues.
The Comptroller’s Office assumed oversight of the plan in 2020 after CRSA exhausted its funding and fired its executive director.
When the Lamont administration refused to extend a requested $1 million line of credit to the authority, the comptroller’s office received state funds to hire program staff.
The pension scheme – now more than four years after its original launch date of January 2018 – was supposed to be run without using taxpayer funds.
In 2019, Connecticut lawmakers inserted language into the new state budget that added to the controversy – requiring multiple plans as originally intended, but now from a single vendor.
This contradicts then-Governor Dannel Malloy’s insistence in 2016 that the plan provide participants with multiple options from multiple providers to ensure competition among pension plan providers.