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Connecticut’s State-Mandated Employee Retirement Plan — Secure Choice — Could Initiate a Pilot in 2021

Connecticut is trying to implement a state-mandated, employer-sponsored retirement plan pilot - Secure Choice - in 2021 in response to the growing retirement crisis in the United States.
An employer speaks with an employee about a retirement program.

Businesses in the Constitution State and their employees might finally get to benefit from a state-mandated retirement program originally enacted in 2016. The latest information from the Connecticut Retirement Security Authority shows it is refining its implementation timeline and a pilot program could begin as early as 2021.

The Connecticut Secure Choice Savings Plan, similar to nearly a dozen other states that have enacted plans, aims to address the ongoing and growing retirement crisis in the United States.

Why does Connecticut need an employer-sponsored retirement plan?

More than 600,000 private-sector employees in Connecticut have no access to an employer-sponsored retirement savings plan, according to the state Comptroller’s office. In the U.S., households nearing retirement have a median retirement account balance of less than $15,000.1

A National Institute of Retirement Savings report found that less than one-quarter of those employed by a company with 10 people or fewer has access to a payroll-based retirement plan. There are 322,805 small businesses in Connecticut, according to the latest data from the U.S. Bureau of Statistics, and nearly 95,000 have employees. However, the nearly 230,000 that have no employees can also participate in the program.

Participants in the Connecticut Secure Choice Savings Plan — a Roth auto-IRA — can help employees start saving for a dignified retirement and gain a recruiting and retention tool.

What employers should know about the Connecticut Secure Choice Savings Plan?

Connecticut requires participation from employers with five (5) or more employees and who do not currently offer a retirement plan to employees. Private employers with four or fewer employees may also choose to offer the plan but are not required.

All employees earning wages in the state of Connecticut and employed for at least 120 days will be automatically enrolled in the state plan. Employers are not permitted to make contributions to the program.

Employers will be responsible for providing each eligible employee with information about the state-run program within 30 days of the employee’s hire date and documenting it. They also must deduct and remit employee contributions in a timely manner.

An employer could face civil and criminal penalties for failing to enroll an eligible employee or remit contributions properly.

What employees should know about the Connecticut Secure Choice Savings Plan?

Employees are eligible to participate if they meet the following criteria:

  • They are 19 years of age or older
  • They are employed with an employer for at least 120 days
  • They are employed and earn wages in Connecticut

Employees will be automatically enrolled in the program but can voluntarily opt out. They can also change their enrollment rate, which has a default rate of 3 percent and annual auto-escalation up to 6%.

The Connecticut Retirement Security Authority plans to provide an age-appropriate target date funds to invest each employee’s account, and once the employee reaches normal retirement age then 50% of the account will get invested in the lifetime income investment. Participants will have the option to invest a higher percentage in the lifetime income investment. More details will be provided once the plan is scheduled for implementation.

A participant may contribute up to the annual IRS limit for a Roth IRA, which for 2020 and 2021 is $6,000 (or $7,000 if you’re 50 or older).

Employees, should they change jobs, also can continue to contribute to the account or roll it over to another retirement account.

Looking forward

With the Connecticut Retirement Security Authority revising the implementation timeline, no definitive start date for a pilot has been set. Paychex will continue to provide updates when information is available. Small businesses can provide a perk such as a retirement program to enhance their ability to attract and retain younger employees and help them start building a retirement savings. Businesses do not have to wait for the Connecticut Secure Choice Savings Program to launch; opening a retirement plan [e.g., 401(k)] through a provider such as Paychex would satisfy the state mandate.

1National Institute of Retirement Savings, “The Continuing Retirement Savings Crisis”

Female author icon
Maree P. Vahue, MBA, QKA, is a professionally accredited Retirement Services Compliance Analyst II for Paychex, Inc. who concentrates in retirement plan, S125 and HSA Administration. She leads monitoring and analysis of ERISA legislative and regulatory changes within the the retirement services and S125 compliance disciplines.
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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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