Virginia E. McGarrity
April 7, 2022
Experts Corner
Here’s what employers need to know about CT’s mandatory worker retirement plans
renjith krishnan | FreeDigitalPhotos.net
By Virginia E. McGarrity and Alisha N. Sullivan
In response to what many financial experts consider a retirement savings crisis, the state of Connecticut enacted legislation in 2016 creating the Connecticut Retirement Security Authority (CRSA).
The CRSA was tasked with designing and implementing a state-sponsored retirement savings program through which private-sector employees can participate if their employer does not offer a retirement savings plan.
While multiple states have adopted similar legislation, only three other states have implemented similar state-sponsored retirement programs thus far.
Enter MyCTSavings, the retirement savings program created by the CRSA to assist the more than 600,000 private-sector employees in Connecticut who still have no access to employer-sponsored retirement savings plans.
Under this program, private-sector employers (both for-profit and nonprofit) with five or more employees -- each of whom have been paid more than $5,000 in a calendar year -- are required to participate unless they offer a qualified employer-sponsored retirement plan.
Although participation is mandatory, employers are not required or permitted to contribute to the program, and only those employees that (a) have been employed for at least 120 days with the employer; (b) are at least 19 years old; and (c) perform services within Connecticut, must be enrolled.
For employers with employees living outside of Connecticut, those employees will be covered if they have earned income in Connecticut.
Employers are required to register for the program and to provide the CRSA with certain information about their employees.
Thereafter, employers’ duties will be limited to distributing CRSA-provided information and remitting payroll deductions.
To minimize participating employers’ liability exposure, the administrative rules for MyCTSavings state that participating employers will not have any liability for the investment decisions made by the employees or the CRSA. That language, however, may not shield participating employers from all potential liability (e.g., late or incorrect remittance of payroll deductions or failing to distribute required disclosures to eligible employees).
Eligible employees will be automatically enrolled within 60 days following the participating employer’s distribution of the CRSA-provided information to the applicable employee, unless the employee takes affirmative action to opt out.
Employees may also make alternate elections, such as contribution rate changes and investment selections. Employees may opt out by contacting MyCTSavings directly. Employees that do not opt out will be automatically enrolled at a contribution rate of 3% in certain default investments.
Additionally, employees may be able to contribute directly to their account. The program is set up as a Roth IRA, which means that contributions are made on an after-tax basis and employees may contribute up to the 2022 Roth IRA annual limit of $6,000 ($7,000 if the employee is age 50 or over).
Alisha N. Sullivan
Each employee is responsible for determining their Roth IRA eligibility, and should discuss such eligibility and contributions with their own tax advisor.
MyCTSavings will be rolled out in waves, with notices being sent out in early April to approximately 30,000 employers informing them about the program and the requirements to participate.
Employers that expect to be affected by the rollout may wish to start by determining which wave they will fall into. The program was officially open for enrollment and exemptions on April 1, 2022, and the registration deadline will depend on which wave the employer falls into.
Unless a business is exempt, required participation in the MyCTSavings program is based on the following enrollment waves:
- Wave 1 covers employers with 100 or more employees; registration ends on June 30, 2022;
- Wave 2 covers employers with 26 to 99 employees; registration ends on Oct. 31, 2022; and
- Wave 3 covers employers with 5 to 25 employees; registration ends on March 30, 2023.
During registration and beyond, employers will be required to: provide information about their eligible employees; set up payroll deductions; make contributions within 10 business days to the employee’s account; and review employee contribution decisions prior to payroll submissions.
Employers can join at any time, but must comply with the requirements by the registration deadline. CRSA will be monitoring businesses for compliance and the Attorney General is authorized to investigate any alleged violations.
Virginia McGarrity is a partner and Alisha Sullivan is an associate in the employee benefits + compensation group at law firm Robinson+Cole. Keisha Palmer, a partner in Robinson+Cole’s public finance group, is a member of the board of directors of the CRSA. She was not involved or consulted with for this article.
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