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Retirement-For-All Bill Raises Questions

by Christine Stuart | Mar 12, 2014 5:30am
(19) Comments | Commenting has expired
Posted to: Business, Economics, Equality, Pension

Christine Stuart photo

Sen. Martin Looney, D-New Haven

When it comes to creating a retirement plan for all Connecticut residents there are still more questions than answers as lawmakers seek to find ways to ensure residents are retiring on more than Social Security.

This year, Sen. Majority Leader Martin Looney and House Majority Leader Joe Aresimowicz teamed up to find a way to automatically enroll everyone in Connecticut that currently doesn’t participate in an employer-sponsored 401k or an Individual Retirement Account.

At the heart of the bill, which received a public hearing Tuesday is the automatic payroll deduction concept to get workers who normally don’t contribute to their retirement to participate in the state plan with a “guaranteed rate of return.”

What the rate of return will be and even how much money residents could contribute to the plan are questions that will need to be answered by the board that will oversee the trust where the money will be held. No state money is being contributed and lawmakers said employers won’t be expected to contribute money toward the plan.

However, Aresimowicz said employers will be responsible for setting up a payroll deduction for their employees. A former combat medic, who workers for one of the state’s largest unions, Aresimowicz said setting up a deduction for an employee is as easy as checking a box in Quickbooks.

“While products are out there in the marketplace, folks aren’t taking advantage of them,” Aresimonwicz said.

And the problem is getting worse, not better.

Looney said 43 percent of Connecticut workers between the ages of 25 and 44 were not covered by a retirement plan in 2010, the last time analysis was given.

But opponents of the legislation say if it’s a matter of educating the public about the need to save for retirement, then that’s what the state should be doing. It shouldn’t be forcing workers to participate in a retirement program where an appointed board will decide how much money a person receives during their retirement.

The Connecticut Business and Industry Association, the Insurance Association of Connecticut, and the Connecticut chapter of the National Association of Insurance and Financial Advisors is opposed to the bill.

“While we agree with the premise that people should be saving more for retirement, the solution put forward in this bill is a misreading of the problem,” CBIA Assistant Counsel Eric Gjede said. “This bill is a ‘supply’ answer to a ‘demand’ problem. There is no shortage of easily accessible IRA plans available to any Connecticut resident who walks through the door of their local bank.”

Currently, there are thousands of agents who are able to work with individuals on retirement planning, Catherine Ernsky, president of both the Ernsky Group and the National Association of Insurance and Financial Advisors Connecticut chapter, testified.

She suggested the state team up with the private sector and create a marketing campaign, in addition to embracing President Barack Obama’s new federal MyRa program.

Aresimowicz said the administrative costs for the state’s plan would be lower than 1 percent. He said administrative costs being offered in the marketplace are higher.

However, those who contribute to their retirement may not be able to do so tax free. The state of Connecticut would still need to obtain a waiver from the federal government to allow residents to make the contributions without a tax penalty.

The only other state with a similar plan is California, which adopted their retirement board in 2012. While the board has been meeting since last year it has yet to complete a market analysis and has yet to hear from the federal government about how it would be treated by the Internal Revenue Service.

In Connecticut, a similar bill died last year on the Senate calendar, but supporters believe they will succeed this year.

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(19) Comments

posted by: DrHunterSThompson | March 12, 2014  7:44am

DrHunterSThompson

i just don’t get it - unless this is simply a big brother, overbearing government thing - are there not individual retirement plans offered by a zillion companies easily accessable to everyone? i don’t get why our legislators are wasting time talking about it - let alone actually acting upon another government mandate to control our lives.

explanation anyone?

HST

posted by: jim black | March 12, 2014  9:06am

There are no suprises here. Democrats in this state lay awake at night trying to figure out how to pocket the working mans paycheck. Any one who thinks this won’t be raided like say the transportation fund, is in denial.

posted by: jim black | March 12, 2014  9:11am

Why is it that if California does something stupid, Connecticut can’t wait to do it.

posted by: Joebigjoe | March 12, 2014  9:34am

Jim and HST you are both right.

The answer is simple and at it’s core the word is “Control.”

posted by: Bluecoat | March 12, 2014  9:35am

And after this proposal removes more private sector money out of the economy and into the hands of Denise Napier and this Ponzi Scheme implodes, we have Rep. Betsy Ritter who proposed a “hoarder tax” to steal even more money away from private businesses. Didn’t Rep. Aresimowicz campaign a few years ago on combining state offices in an attempt to save the tax payers of CT money? How’s that working out?
Instead of supporting all of Malloy’s crippling borrowing to support a pier/office building for one of the largest hedge fund companies in the US, a bus way to nowhere, and a mice lab, the best idea He supports now is a Ponzi Scheme retirement fund for all us stupid people?
Is there any decent person that can run against the House Majority leader that isn’t in the “brown paper bag business”?

posted by: JAM | March 12, 2014  10:23am

Who is going to guarantee the rate of return? The Taxpayers?
Invest in Treasuries, and when rates rise, the face values will sink like rocks. Is the taxpayer supposed to make up the difference? Don’t we already have a boatload of unfunded liabilities to deal with?
There are lot of better products out there that offer much better diversification, and better returns.
Sounds like a proposal put together by a bunch of with no real experience. Oh wait a minute! They’re Legislators with a proven record of little or no experience.

posted by: Jim in Mfg | March 12, 2014  12:12pm

This is not such a bad idea but it should be voluntary, by the employee, and thus would have to be competitive with what is offered by financial advisors and others.  The fact that the CBIA and the CT Assoc of Insurance and Financial Advisors are opposed to this is because they derive high fees from small and individual plans.

  There are many small companies that do not offer a 401k and while those employees could open up IRAs,  a 401k is more convenient and could have the benefit of professional fund managers.  I run a small company (4 employees) and we have a 401k plan that I set up with American Funds.  The problem with these small plans is the administration and fees do not have the economy of scale.  The TPA cost at least $1300 per year, the Funds managers give you the worst class of shares (with high fees) as a small plan has no bargaining power. 
As an employer, it is really easy to add a deduction to your payroll service and forward the money directly on to the investment fund.  It is Plan documents, amendments, and filing Form 5500 that are the problem.  Thus if the state set up a statewide plan, with one set of rules/documents, and filed the 5500, there would be little work for the employer and a significant benefit to many employees who do not currently have access to a plan.

posted by: ocoandasoc | March 12, 2014  1:51pm

Any wage-earner can walk into virtually any bank in America and open an IRA with NO FEES and then contribute to it on a voluntary basis as they choose. Sure, there are contribution limits, but his would be the logical first step for anyone who has not yet participated in an IRA or 401K.
The State Legislature would love to automatically take money out of wage-earners paychecks (they believe they know what’s best for us better than we do!) so they could use the money to hire outside firms to administer the plan (these firms would of course make generous contributions to legislators’ re-election campaigns and then give them jobs after they leave the legislature) and then periodically “borrow” from the funds to finance boondoggle special interest projects requiring union labor (securing both votes and more money for their re-election campaigns.) If the State-run retirement funds go into the red or are underfunded (like most State-administered retirement funds are at present) then the State’s taxpayers would just make up the difference. This is a great idea for the legislature members, but a very raw deal for just about everyone else.

posted by: ABC | March 12, 2014  3:03pm

What a great idea.  In fact wouldn’t it make better sense if we just sign over our entire paychecks to wise men like Mr. Looney so that they can make every important decision on our account? Lord knows I can’t be trusted to make my own decisions. (I’m a hot mess!) 

Just imagine if we all could have someone who is much, much smarter than we are make all the important decisions in our lives.  Someone say, like a state bureaucrat.

Finally I wouldn’t have to worry about my healthcare, education, entertainment (quiet movie theaters), vices (Pot yes, Keno no). Things would be so much less stressful.

Now, if only they could walk into the voting booth for me…

posted by: ASTANVET | March 12, 2014  8:07pm

And we still keep electing these people!

posted by: art vandelay | March 12, 2014  9:02pm

art vandelay

Typical Democrat strategy.  Pander to the low information voters to get elected then pick their pockets.

posted by: Lawrence | March 13, 2014  6:12am

Nobody here has a CHET account with the state to save for their children’s college tuition?

I’ve got three. They’re working great.

This is the same idea, only for retirement. What’s the problem?

posted by: Joebigjoe | March 13, 2014  8:18am

Low information voters that don’t realize that they are low information vote for these people.

Nationally if your vote counted a certain percentage based on your knowledge of Civics (of course would never happen) then the balance of power would be far different. In this case Looney is appealing to a constituency that doesnt get their news from CT News Junkie where they would see both sides and become more aware.

posted by: art vandelay | March 13, 2014  12:04pm

art vandelay

@Lawrance,
Why would you want the state to be the fiduciary of your private bank accounts.  It makes no sense to me.  Your money could work much better for you in private accounts like Fidelity or Vanguard.  You would have more control over it.  With wise investments your money could grow much faster.  When my children were born I put money into a well balanced mutual fund and did quite well.  It was during the Reagan years I might add.  When my children were ready for college the money was there.  Can’t see the government doing that.  I might add my private IRA has done much better than Social Security.  Years ago I invested in Apple, Boeing & Tesla.  The stocks have taken off, but I watch them carefully.  Can’t do that with Social Security!!!!  I guess if someone is a low information voter who believes 100% in the Nanny State, this new program is for them.  I can’t think of one thing the government got right, so why should this program be any different.

posted by: Joebigjoe | March 13, 2014  2:37pm

Here is something for the low information crowd that even if they knew this would be against it, unless they were nuts.

It was just announced that the Obama adminstration wants to pay for people in the military that want to have change of gender surgery at an estimated cost of 30000 dollars per.

They want to cut veterans benefits (yes I saw Paul Ryan went for that too) but want to pay for this.

Now as much as that offends me that I should have to pay for elective surgery like that, I didnt know that in the military you cannot show tattoos below the elbow. So if you are a marine you cant have a globe tat, Ranger cant have a Ranger emblem, Seal cant have a Trident on his forearm because people might find it offensive. However a guy in the military can walk around in high heels if he wants, and we now will pay for people to have an operation that offends many more people. You want the operation pay for it yourself. We are broke.

I dont trust the government with my money and I dont trust them with telling us what is right or wrong. There truly is a sickness and evil in some of them.

posted by: StanMuzyk | March 14, 2014  2:47pm

Our voters gave the right to our Democratic controlled political leadership politicians “to pick our pockets—and they are doing a hell of a good job at it.” It’s a virtual daily occurrence. The Republicans do not have the votes to stop them. Realistically—
we have a virtual Democratically controlled Mafia running our state—“and only the mob, not the people, benefits from its iron-clad rule.”  We did it to ourselves!

posted by: justsayin | March 15, 2014  7:26am

Lawrence again CHET is voluntary. No need for state to force this on taxpayers and business. Government needs to be limited in our lives not expanded.

posted by: Joebigjoe | March 15, 2014  11:42am

Government is out of freaking control. Those of you that support Obama have to answer this. Seriously I need to hear your rational.

He wants an executive order or has already signed it having to do with overtime. The man has no clue about business. None whatsoever.

Here is what will happen. Companies will now have to track everyones working hours. That costs money. Companies will now make sure no one works more than 40 hours a week which will quash innovation and quash what we are about (or some of us are about) as Americans.

The person who works at The Hartford that wants to get ahead will come in early to show that they are eager, and will stay late so they can get their job done exceptionally well so they can get promoted and provide more for their family and meet their life goals. Now companies may say they cant do that because they don’t want some lawsuit 5 years down the road.

The Silicon Valley programmers that work all night because they want to start the next Google cant do that because they will be required to get overtime because they are working more than 40 hours, and thats not affordable for a small firm with limited capital.

This is pure communism. We are not all the same and there is no bottomless pit of money in businesses that this would not impact jobs, effort and hiring.

I read someone say that the poor secretary who makes 22000 a year and has a boss that loads them with work that requires them to stay 30 minutes later a few times a week deserves overtime. In a perfect world maybe.

How about that employer then starts requiring them to account for the personal discussions they have, time in the bathroom, calls from home, checking personal email. Make it like billable hours for an attorney and see how many actual hours they work in that 40. They should be happy they have a job, and if not ask for a raise and if you dont get it then go work elsewhere.

posted by: StanMuzyk | March 16, 2014  6:38pm

Major concerns must be answered before this questionable bill can be enacted and supporters should not be over-confident that they will succeed this year.