Last week, Connecticut Comptroller Natalie Braswell announced the formal launch of the MyCTSavings program, billed as a new retirement savings option for the more than 600,000 Connecticut private-sector workers who are not currently offered a plan through their employer.
In launching MyCTSavings, Connecticut joins a growing number of other U.S. states that are bringing online new retirement savings opportunities for their residents working in the private sector. In fact, in the past six years, some 14 states have started the process of creating state-facilitated retirement savings programs, with the potential to reach almost 20 million workers in the aggregate. Although many of these efforts are in the early stages, three programs—CalSavers, Illinois Secure Choice, and OregonSaves—have already accumulated close to $420 million in assets. These three systems cover nearly 440,000 savers working for 47,000 employers.
Such programs recently enjoyed a critical court victory when the U.S. Supreme Court declined to accept an appeal of a lawsuit involving the CalSavers Retirement Savings Program. The lawsuit, filed by the Howard Jarvis Taxpayers Association, aimed to block CalSavers on the grounds that the federal Employee Retirement Income Security Act pre-empts it and thereby invalidates the program.
As Connecticut Comptroller Braswell tells PLANADVISER, that ruling clears the way for programs like CalSavers and MyCTSavings to become an important part of the retirement savings framework across the United States.
“Everyone deserves a financially secure retirement,” Braswell says. “The MyCTSavings program creates new opportunities for workers to plan for their futures and fills a critical need in the marketplace. The plan is designed to be easy for employers to maintain and is optional for workers to participate [in]. I’m grateful to everyone who worked to get us to this point and look forward to the hardworking people of Connecticut benefitting from this important program.”
Braswell says the program enjoys the strong support of Connecticut Governor Ned Lamont, noting that the program also benefitted from the leadership of former Comptroller Kevin Lembo. She says the state’s leadership is firmly committed to MyCTSavings and ensuring that workers in the state can successfully provide for their own financial futures—an outcome that will in turn save state and federal resources down the line.
With the program now up and running, letters are being sent to approximately 30,000 Connecticut employers informing them of the MyCTSavings program—and the requirements to participate. Similar to how such programs have been constructed in other states, in Connecticut, employers are required to register if they have more than five employees and do not currently offer a qualified retirement savings option. Participation for employees is voluntary, meaning they can choose to remain enrolled or even opt out and then re-enroll later. The regular contributions are directed post-tax to a Roth individual retirement account that is portable, so if a participant changes jobs, their account follows them.
The program is sponsored by the Connecticut Retirement Security Authority, of which Comptroller Braswell serves as chair. The Board selected Vestwell as the program’s third-party administrator after a competitive bidding process.
Jessica Muirhead, the Interim Director of the Connecticut Office of the State Comptroller, notes that the program’s rollout statewide has been informed by the results of a pilot program that kicked off in October and featured about 10 employers. She says the employers already in the program have seen strong engagement from their workers, many of whom may never have had the opportunity to save for retirement via automatic payroll deductions.
Among the early employers to embrace the program is JCHI Cleaning LLC in Norwalk, led by its president, Diane Peters.
“I really like the program and see how beneficial it has been to my employees,” Peters says. “Some have chosen to participate and other chose not to, but what this type of program provided is an opportunity to make them aware of saving, especially for retirement.”
“As a small company, it can be hard to compete with benefits packages at large corporations,” says Axel Collazo, an assistant manager of Ace Transportation of Tolland, which has also signed up for MyCTSavings. “It was easy to enroll and our employees who chose to participate are already excited about the opportunity to start saving for retirement.”
Other participating employers say their administrative burden in providing MyCTSavings to their workers is minimal.
“One of the most common questions we received during the pilot program was just to describe what the program is and what its goals are,” Muirhead says. “We were able to explain to people that MyCTSavings is a solution that delivers a viable retirement savings opportunity to the small business sector. It is built around a simple, two-step process for employers to participate. First, they go into the system and update their roster of participating employees, and then on payday, they upload the deductions. The money is not taken by the state for management. It goes into an individual retirement account owned by the worker.”
Muirhead says the pilot program helped the state to create FAQ documents and other resources to supplement the sign-up process. She and Braswell say they have high hopes for the program’s participation rate, but they acknowledge that it will take some time for the program to gain steam.
“The reason we started this endeavor to begin with was that we recognized that individuals who did not have a workplace savings opportunity are put at a distinct disadvantage relative to workers with 401(k) access and matching contributions,” Braswell says. “When we talk about upwards of 600,000 new people gaining access to savings opportunities at work, that is so meaningful. Even if we only get a quarter or a half of this population to participate in the next few years, that will represent an incredible number of new retirement savers. Looking at the future of the program, we are very optimistic.”
Braswell says the state has benefitted throughout this process from close collaboration with the AARP—a sentiment echoed by Nora Duncan, the state director of AARP Connecticut.
“We are pleased that the MyCTSavings program is launching and will provide a more secure retirement for the over 600,000 workers who do not currently have a payroll deduction retirement savings program,” Duncan says. “Employees are 15 times more likely to save for retirement when offered an auto-deduction opportunity. This program is a win-win-win. It will help employers provide a no-cost benefit to their employees. It will provide employees with a more secure retirement. And it will benefit all Connecticut taxpayers by reducing the need for social safety net programs in the future.”