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Public Retirement Account Debate Returns, But Not Much Has Changed

by | Feb 11, 2014 2:11pm () Comments | Commenting has expired | Share
Posted to: Business, The Economy, Jobs, Labor, Pensions

Christine Stuart photo Union officials, a retired couple, and a self-employed graphic designer from Stonington described the need Tuesday for the state to set up a public retirement account for all Connecticut residents.

At a Capitol press conference, Dorry Clay, a self-employed web designer, said she fears she will have to work until she’s 70 because she was laid-off from her employer and then diagnosed with cancer, which depleted her retirement savings.

“Having a low-cost, easy-to-understand, accessible savings plan would be a big benefit for everyone across the state who is self-employed like me, as well as countless employees who aren’t provided an option like this through their company,” Clay said.

She said access to individual retirement accounts are limited because of minimum contribution limits, high fees, and the amount of technical knowledge one must have in order to understand what investments they are making.

Bill Tyszka, a retired Simsbury resident, said there used to be a simple formula that existed when he entered the workforce.

“You worked hard. You played by the rules. You worked 30 to 40 years, and then at an appropriate time you retired using your Social Security and whatever personal money you could invest or save and a good pension plan,” Tyszka said. “That system doesn’t exist anymore. It’s broken.”

He equated retiring in comfort to buying a lottery ticket.

“Luck should not be involved in a retirement plan,” Tyszka said. “We want everyone to have what we have.”

Sen. Cathy Osten, who co-chairs the Labor and Public Employees Committee, said this year’s bill would be similar to last year’s version in that it would create a trust fund that’s overseen by a board.

She said residents would contribute to the fund and would be guaranteed a specific rate of return upon retirement. But she said private employers would not be required to contribute to the account like the state is required to contribute to its state employee pension and teacher retirement accounts.

In 2012, Connecticut’s State Employees’ Retirement System had $9.7 billion worth of assets, which is enough to cover 42.3 percent of its $23 billion in liabilities. The Teachers’ Retirement Fund had $13.7 billion in assets, which is enough to cover 55.24 percent of its $24.9 billion in liabilities. Experts say an 80 percent funding level is considered healthy.

Osten said the low figures are not the result of state employees and teachers failing to contribute to the fund. Rather, she said the state failed to meet its obligations.

The group said the trust fund they were talking about setting up is different than the state employee and teacher retirement funds.

“This employee pension fund would not require an employer piece to it,” Osten said Tuesday.

At one point in the drafting process, last year’s legislation would have mandated employers who don’t offer retirement plans to their employees to participate. This year’s bill has yet to be drafted.

“We’re not requiring small businesses to pay into this at all,” Osten said.

But the Connecticut Business and Industry Association, which opposed the bill last year, isn’t holding its breath.

“We have significant concerns about a retirement mandate,” Eric Gjede, CBIA’s assistant counsel, said Tuesday.

He said they support the goal of saving more for retirement, but believe there’s already a way to accomplish that through the private marketplace.

Sal Luciano, executive director of AFSCME Council 4, said that if an employer has fewer than 100 employees it’s not uncommon for them to pay 2.5 percent in investment fees. He said in order to get to the 0.067 percent range, an employer would have to have 10,000 employees.

He said this would allow people to pay 0.05 percent right off the bat.

“You save a couple of a percent from the beginning in administrative fees and you gain a couple percent from having professional money market people investing your money,” Luciano said.

Gov. Dannel P. Malloy said everyone in the state has an opportunity to create a retirement account, but he understands the practical need to make it available to more people.

“I think it’s a discussion worth having,” Malloy said.

He said there is an industry that exists and the state doesn’t want to put that industry out of business. He said the state also wants to give more people an opportunity to have a retirement. He said he’s looking to strike the right balance between those two needs.

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(7) Archived Comments

posted by: Greg | February 11, 2014  4:41pm

With not much research one could find low fee carriers like Vanguard or Fidelity, open an IRA or Roth IRA, and contribute up to the max per year with the tax advantage. Do some more research and dump the money into a fund of minimal risk and there you go. 

Under this proposed plan—of which details are light—would the State annuitize one’s contributions? Would the state shoulder the risk of investment returns; coughing up taxpayer money to make up for the loss, if there was a loss? The name “employee pension fund” would lead me to believe the state of CT does shoulder the investment risk, thus creating yet another unfunded liability. Am I wrong here?

posted by: Bluecoat | February 11, 2014  5:07pm

This has been a progressive’s dream for years now.
“The Feds Want Your Retirement Accounts
By John White

Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts such as IRAs. Slowly, the cat is being let out of the bag.

Last January 18th, in a little noticed interview of Richard Cordray, acting head of the Consumer Financial Protection Bureau, Bloomberg reported “[t]he U.S. Consumer Financial Protection Bureau [CFPB] is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency’s first foray into consumer investments.”  That thought generates some skepticism, as aptly expressed by the Richard Terrell cartoon published by American Thinker.”

This is nothing more than a Ponzi Scheme to help shore up the already broke Public Pension System.
and if this doesn’t work,
then CT Rep. Betsy Ritter has an idea:
“Rep. Betsy Ritter, a Waterford Democrat, not only has sponsored a “combined reporting” bill, but she has also proposed a hoarder’s tax. This would place a levy on liquid assets — companies with a lot of money in the bank — and dedicate the proceeds to job creation programs. - See more

posted by: ocoandasoc | February 11, 2014  7:07pm

This is just another scheme by the Union-controlled WFP to get more public money into Union pockets. The State will collect the money, the State will borrow from the fund, the State will use the money to fund Union labor projects, the State will use taxpayer money to make up the inevitable losses in the public pension fund. Connecticut as a State has the worst record in the country when it comes to pension administration. Asking them to take on a public pension program is worse than irresponsible. And, from the employees perspective, asking the State of Connecticut to manage your pension fund is akin to asking the fox to guard your hen house.

posted by: art vandelay | February 12, 2014  7:29am

art vandelay

When the “Socialists” run out of ideas to obtain more money, they will go after IRA’s & 401K’s.  With one stroke of a pen healthcare was transferred from the private to public sector.  Why not retirement accounts?

posted by: Really? | February 12, 2014  1:51pm

Really?  No, stop…is this story part of an April Fools issue?  Who are these people and do they know there’s a free market with competitive pricing and options out there?  Otherwise I’m speechless.

posted by: justsayin | February 12, 2014  4:21pm

How nice “not requiring small business to pay in” thanks, how swell of you. Keep it up and there will soon be no small business,  only Keno and tabacco to keep the state workers afloat, at least the essential ones.The rest enjoy the day off tomorrow.

posted by: Lawrence | February 12, 2014  5:53pm

Doesn’t sound all that different from the CHET college savings accounts I have for my children through the state. They are performing handsomely, and I am very happy. If there was a similar program set up for people to save for their retirement, I think it would be a good idea. Of course CBIA is opposed to this new idea—it takes money out of the hands of private-sector CEOs and CFOs. And the CBIA only cares about the 1%, not about middle class people and their needs.

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