CT Bill for State Small Business DC Plans Passes Senate

A bill backed by a powerful Connecticut state lawmaker that would create a state-sponsored defined contribution retirement plan for employers with fewer than 100 workers has passed the state Senate.

AHartford Courant news story said the measure, backed by Senate Democrats including Senate President Pro Tem Donald Williams, passed the chamber on a party line vote of 22 to 11.

The news report said Williams, the proposal’s chief backer, and the Connecticut chapter of the AARP, were jubilant at the vote. “By pooling together small-business employees from across Connecticut, we will help people save for retirement and instantly give our small businesses a real advantage over out-of-state competitors,” Williams said, according to the news account.

Despite the Senate vote, however, the Courant said the bill faces a decidedly uncertain future with an “army” of opponents working against it in the state House including the Connecticut Business and Industry Association (CBIA), the Connecticut Bankers Association, the Insurance Association of Connecticut and others.

The bill would allow the state comptroller to create the program that would also apply to self-employed individuals and tax-exempt nonprofit organizations, which could get payroll deduction IRAs and other offerings in a voluntary program with no mandatory employer contribution.

According to the newspaper, while Democrats say there would be no cost to the state, opponents argue that a similar idea in Maryland would have had start-up costs of $625,000 and an annual state subsidy of $400,000 over the next four years.

A similar idea has been proposed in California (See Bill Would Open CalPERS to Private Sector Workers) and the state of Washington is moving ahead with a plan to offer retirement savings accounts through its public employee retirement system. Washington lawmakers are expected to consider the proposal in 2009.