State's Proposed Retirement Program Scaled Back

HARTFORD — The legislature's labor committee has scaled back the scope of a proposed state-offered retirement program, but it would likely extend the time it would take to pay back startup costs.

The state's retirement security program would create an IRA that would be available at any workplace with at least five workers that doesn't offer a pension or 401(k) plan.


Workers, once they had been employed 120 days, would have 3 percent of their pay put into the IRA. Participants would have to take action to opt out of the program or to save more than 3 percent toward retirement.

Originally, the legislature was considering a 6 percent contribution, which would have meant the fund would reach the $1 billion level needed to be self-sustaining within two years.

The revisions mean it could take as long as eight years to pay back the program's startup costs. The revised legislation was approved in an 8-5 vote by the labor committee last week, with Democrats supporting the measure and Republicans opposing it.

The Employee Benefit Research Institute reported in 2014 that 49 percent of private-sector full-time workers have access to a pension or 401(k) through work.

Consultants in charge of evaluating the financial feasibility of Connecticut's plan assumed there would be two to five state employees managing the contract with a private vendor and that opt-out rates would range between 16 and 27 percent, depending on the worker's age and earnings.

The consultants assumed just 1.5 percent of assets would be taken out before people retired in any given year. They also were modeling a plan that only charged fees of 0.5 percent.

The substitute language also means the state plan would be offered in fewer workplaces. In the original bill, certain part-time workers would have been eligible.

House Majority Leader Joe Aresimowicz testified that he supports creating a statewide IRA because the amount of money the state is spending on food stamps, heating assistance and Medicaid for elderly people is growing.

Currently, 28 percent of Connecticut retirees have no income other than Social Security. The average Social Security benefit in Connecticut was $17,056 at the end of 2013.