House Passes Penalties For Businesses Failing To Comply With State Retirement Program

HARTFORD — The Connecticut House of Representatives passed a bill establishing fines the Connecticut Comptroller can levy against businesses that fail to enroll their employees in the state-run, private sector retirement plan known as MyCTSavings.

Comptroller Sean Scanlon has been making efforts to reach businesses across the state, including going on tours to draw attention to Connecticut’s retirement program, which requires businesses that do not offer retirement plans to automatically enroll their employees in MyCTSavings – a Roth-IRA savings plan administered by a third party.

Seven years in the making, MyCTSavings was rolled out in 2022 with mailings to tens of thousands of businesses in Connecticut informing them they must register with the state and indicate if they have a qualifying retirement plan for employees. As of April 5, Scanlon announced that 3,500 businesses and 10,000 employees had enrolled in the program.

While there is no contribution to the retirement plan by employers, other than time and administration to make the 3 percent paycheck deduction from workers, the program lacked a defined enforcement mechanism for businesses that failed to comply with the state law, something Scanlon said he wanted to avoid using.

Under current law, the Comptroller or Department of Labor can file suit if a qualifying business fails to enroll. Under House Bill 6552, however, the Comptroller could levy fines between $500 and $1,500 on businesses, depending on the number of employees.

According to the bill, the Comptroller’s Office would have to send two notices of noncompliance and a final notice to businesses for failing to enroll or failing to remit payments into the system, before it can issue the fine.

Additionally, the bill lowers the number of days an employee must work in order to be covered by the program from 120 days to 60 days. Employees are automatically put into the program with a 3 percent paycheck deduction but can opt out.

Enforcement Mechanism Required

In written testimony to the Labor and Public Employees Committee, Scanlon said the legislation “makes necessary technical and operational improvements” for MyCTSavings, and that the program “lacked a clear mechanism to enforce the requirements of the Program.”

“This means that many workers who should have access to a retirement savings plan will not receive that benefit, and at present, the state is limited in how it can enforce the law to protect that access. Our office seeks reasonable and less severe enforcement mechanisms, in line with the practices of other states with similar programs, to enforce the requirements of the program,” Scanlon wrote. “Currently, the bill does not allow the Office of the State Comptroller to enforce participation in the program using financial penalties.”

The legislation passed in the House with an 88-61 vote. House Republican Leader Vincent Candelora, R-North Branford, pushed back on the bill, saying it doesn’t help workers and creates needless red-tape for small businesses.

“There’s nothing in this bill that helps workers who are being automatically enrolled into a program that takes money from their paychecks, nor are there provisions that assist small business owners now saddled with the burden of managing the red tape this program has forced into their lives,” Candelora said in a press release. “The notion that fining employers for non-compliance rather than suing them is some sort of win for the business community is an example of a policy decision that furthers our state’s reputation as a difficult environment for job creators.”

Republicans attempted to pass amendments to the bill, including requiring that employees opt into the program rather than being automatically enrolled, but the amendments were voted down.

The legislation extends the amount of time the state’s Retirement Security Authority, which developed and created MyCTSavings, has to pay back money borrowed from the state to create the program. The details of how and when that money will be paid back will be worked out between the comptroller and the Office of Policy and Management.

The bill also allows the comptroller to partner with other state programs to pool resources, and lower administrative costs and fees, which can be substantial over time due to the structure of the investment program, with a larger asset base. MyCTSavings contracted with Vestwell to administer the investments with a set fee structure that will decrease when certain asset thresholds are met. States like Delaware have reportedly approached Connecticut for partnership.

MyCTSavings is one of a number of state retirement programs that have been enacted across the country since 2016 intended to encourage, if not require, employees to save money for their retirement, potentially lessening financial problems and poverty later in life. Connecticut estimates that upwards of 600,000 private sector employers have no access to retirement savings through their employer.

Although Connecticut was one of the first states to pass such a measure, it took longer than others to get off the ground. The bill now heads to the Senate for a vote.

“Questions about this program are often the first concerns that come up in my conversations with business owners over the last few months,” Candelora said. “We needed to do a better job of looking at this legislation through the eyes of employers and employees rather than the State of Connecticut.”

This report comes to you from Connecticut Inside Investigator (CII) — a nonprofit newsroom partnering with The Newtown Bee on a mission to inform the people of Newtown and Connecticut through investigative journalism and inspire the public through engaging stories.