Connecticut Launches MyCTSavings Program with Retirement Savings Options
Connecticut recently launched its MyCTSavings retirement savings program following the success of its pilot program in the fall of 2021. All eligible private-sector employers in the state with five or more employees will be required to participate in MyCTSavings or offer an employer-sponsored retirement plan that satisfies the requirement.
Businesses in the Constitution State and their employees will finally get to benefit from a state-mandated retirement program that originally was enacted into law in 2016.
The Connecticut program, similar to nearly a dozen other states that have enacted programs, aims to address the ongoing and growing retirement crisis in the United States.
Why Does Connecticut Need Employee Retirement Savings Options?
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 350,376 small businesses in Connecticut, according to the latest data from the U.S. Small Business Administration, and more than 745,000 people are employed by those businesses2.
Participants in the MyCTSavings program — a Roth auto-IRA — can help employees start saving for a dignified retirement and gain a key recruiting and retention tool.
What Employers Should Know About MyCTSavings Program
Connecticut requires participation by 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 participate in the program but are not required.
All employees who have been paid more than $5,000 in the calendar year will be automatically enrolled by their employer with a contribution of 3% of the employee’s payroll wages designated to a Roth IRA in the program. Employers are not permitted to make contributions to the program.
There will be rolling registration deadlines based on employer size as follows:
- Employers with 100 or more employees: June 30, 2022
- Employers with 26 to 99 employees: Oct. 31, 2022
- Employers with 5 to 25 employees: March 30, 2023
Employers impacted by this state mandate will be notified by MyCTSavings, and businesses will be required to register or certify exemption if they already offer a retirement plan at https://myctsavings.com/.
Smaller businesses can enroll at any time and do not need to wait for their deadline to arrive. 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 to the program.
An employer could face civil penalties for failing to enroll an eligible employee or remit contributions in a timely manner. The Connecticut Retirement Security Authority will determine any possible penalties for noncompliance but has yet to release what such penalties would be.
What Employees Should Know About MYCTSavings Program
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 from the default rate of 3 percent. There is also an 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.
A participant may contribute up to the annual IRS contribution limit for a Roth IRA.
Employees, should they change jobs, may continue to contribute to the account or roll it over to another retirement account.
Paychex will continue to monitor and provide updates if there are changes to the program or if additional 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 retirement savings. Businesses that want to implement a workplace retirement plan such as a 401(k) can do so through a provider such as Paychex and satisfy the state mandate.
1National Institute of Retirement Savings, “The Continuing Retirement Savings Crisis”
2U.S. Small Business Administration Office of Advocacy, 2020 Small Business Profile
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