Connecticut Officials Say Congressional Action Jeopardizes Retirement Savings Law
State officials are worried that a retirement savings plan created last year by the General Assembly — intended to help the roughly 600,000 residents who lack such a plan — will be in jeopardy if Congressional Republicans get their way.
Connecticut’s plan, slated to take effect in 2018, would require businesses with five or more employees to offer a retirement savings plan. The plan would take 3 percent of an employee’s paycheck and deposit it into a state retirement fund; employers would not be required to contribute money to the fund.
Connecticut has joined with other states to oppose two recent Congressional resolutions that, state officials say, would jeopardize retirement security for hundreds of thousands of Connecticut workers.
State Comptroller Kevin Lembo is among those urging the U.S. Senate to reject the resolutions, H.J. Res 66 and H.J. Res 67. The resolutions would repeal a U.S. Department of Labor rule that helps states create retirement savings plans for private-sector workers.
Repealing those rules, Lembo said, would make it more complicated for plans like Connecticut’s to get off the ground. The rules clarified the authority under which states and municipalities could implement retirement programs, and about 30 states and municipalities nationwide are implementing or exploring them, he said.
The rule essentially made it clear that any automatic IRA program established by a state must remove the operational burden of running a retirement plan from small business owners.
“Connecticut has the right, with or without this repeal, to protect its economy and its residents from a growing retirement savings crisis,” Lembo said in a statement. “However, the federal government should be a partner, not an obstacle, to states, municipalities, businesses, and middle-class workers who all benefit when an entire generation has access to a financially secure retirement.”
Lembo, who championed Connecticut’s plan along with state Treasurer Denise Nappier, sent letters to Congressional leaders last week, urging them to fight the repeal.
“There is an entire generation of workers, many of them lifelong hardworking middle class people, who are headed to retirement financially unequipped, in part due to lack of access to a workplace-based retirement savings option,” Lembo said. “This is not just a serious issue for those individuals and families who are financially forced to delay retirement indefinitely, but for our entire state and national economy.”
Nappier said in a Feb. 17 letter to Connecticut’s two Senators that the Congressional action threatens to halt the creation of the authority that would oversee the retirement system.
Lembo and Nappier were joined in their effort to fight this action by Connecticut’s House and Senate Democrats, who worked hard to convince Democratic Gov. Dannel P. Malloy to sign the legislation.
House Speaker Joe Aresimowicz, D-Berlin, said he called U.S. Sens. Chris Murphy and Richard Blumenthal and asked them to appeal to their Republican colleagues to reject the House resolution.
Senate President Martin Looney, D-New Haven, said he doesn’t know if the Senate Republican leadership is going to be as aggressive in pursuing this as the House.
“It’s up to us now to raise the issue and alert people around the country that it is now in the hands of the Senate,” Looney said.
AARP, which supported the establishment of these public retirement plans, pointed out in a Feb. 8 letter to Congress that states are often the pioneer of these types of solutions.
Nancy LeaMond, executive vice president and chief advocacy and engagement officer, pointed to 529 college savings plans as a way that states have innovated on these types of issues.
“When college savings plans, known as 529 plans, were created 20 years ago, less than $2.5 billion had been saved for college in these programs. Today, individuals have put away more than $253.2 billion for college in 529 plans,” LeaMond wrote.
Aresimowicz said this shouldn’t have been a partisan issue. He said that despite what happens at the federal level, “we are committed here in Connecticut to ensuring that our hardworking residents are given the tools they need to save for a comfortable retirement.
An AARP survey last year found that regardless of political affiliation, 79 percent of Connecticut residents agree that elected officials should support a state retirement savings plan.
Christine Stuart contributed to this report.