Jon Lender: New state retirement authority is almost broke, suspends further financial transactions, and says it may not be able to afford its $175K director. She calls her governing board ‘cowardly.’

It wasn’t a good sign in early 2018 when the fledgling Connecticut Retirement Security Authority fell behind on its start-up schedule for creating a state “exchange" to provide retirement savings plans for employees of small companies that don’t offer such plans.

But that was nothing compared with the grim situation that has engulfed the new agency in recent days -- so grim that the CRSA’s governing board Tuesday approved a suspension of its financial expenditures after determining that it would run out of money by the end of next month. No definite term was established for how long the suspension would last.

The unpaid volunteer board of directors still plans to meet during the suspension of expenditures to search for what its newly appointed chairman, state budget official Michael Walsh, called a “sustainable model" under which the CRSA could get a fresh start. That could involve a move away from an independent agency to one that joins with another state’s similar plan that’s already operating, members said during Tuesday’s special session, which was conducted as a conference call.

It was not immediately clear whether the suspension of expenditures would affect biweekly paychecks for the $175,000 annual salary of the CRSA’s only employee, Executive Director Mary Fay, a 30-year financial services professional and West Hartford town council member who was hired only last January.

At a a previous board meeting, last Friday, members raised the prospect that Fay might have to be laid off, and she responded with an email Saturday that said the “cowardly" and “ineffective” governing board should be disbanded.

That’s pretty much the same outcome sought by critics including the business community and Republican lawmakers, who say the General Assembly never should have passed the 2016 bill that created the CRSA in the first place.

All of this could, potentially, spell the end of the quasi-public CRSA -- which Democrats narrowly pushed through the legislature in 2016 as a vehicle for modestly paid workers to contribute via payroll deduction to “state-facilitated" IRAs -- even before it even gets off the ground.

The Democratic administration of first-year Gov. Ned Lamont says it believes in the CRSA’s mission, but it wants better evidence of its viability before committing to support it in the future.

The crisis at the quasi-public agency surfaced during last Friday’s CRSA board meeting in Hartford.

“We have a math problem," said board member Vin Grillo, a private-sector actuary who watches the agency’s budget closely. He added: "I know Mary’s sitting right here with me, and it’s difficult to say this, but what we’re going to do with the executive director position, we have about six weeks to decide -- because by the end of January, we will not have enough money to pay her.”

Tension grew as the meeting went on. At one point Fay said she was “a little bit stunned” and asked: “Am I done here?”

Board members had no definite answer for her, saying they first needed to research the possibilities. They noted that other states have spent millions to launch similar programs and discussed seeking an appropriation to at least keep Fay on the payroll for six more months -- which would go against past statements that the CRSA would operate without taxpayer funds. But they took no action on that.

‘Unprofessional’ and ‘cowardly’

A day later, Fay sent an indignant email to board members saying she is “[c]ontinuing to hold my head high" after Friday’s “extremely public and humiliating board meeting.”

She thanked one of them, John Sayour, saying “you remain as the sole board member, of 15, who has reached out” to her. But, she continued, “My future lies in the hands of 15 board members. It is very unprofessional and cruel, especially after all I did and accomplished for this cowardly, and quite frankly, amateur board.”

She mentioned deaths of those close to her [most recently her mother-in-law] and said: "Given the timing ... and the holidays approaching, this, in fact, is inexcusable. I’m embarrassed for the board, CRSA, the current administration, and for our state of Connecticut. No wonder we are at the bottom of the rankings, if this is how Connecticut does business. My family’s future hangs in the balance.

"I am extremely proud of all I accomplished, singlehandedly, for CRSA. After 5 years of a do nothing board, in less than 12 months, after it took a year to hire me, I accomplished, singlehandedly, by myself, with my own equipment and working out of my home with no remuneration, getting us to the point of execution in less than 12 months. None of you can take my sole accomplishment and pride away. I did this despite many headwinds, obstacles, and derailments created by you.

"My reputation and character as a senior executive within the financial services industry is indisputably pristine. Many wondered why I would take a low paying job in the public sector. My unwavering answer was, and remains, that I want to help the under-served. I have the expertise, as you chose well to hire me a[s] Executive Director, and I have always given back to my community. Despite the dysfunction of this board, and Connecticut, I will continue to serve as a town councilor, school volunteer, and coach.

“This is my reaction after less than 24 hours of being publicly humiliated, and my family’s lively hood stripped away, despite heroic accomplishments, and still not knowing my fate by this ineffective board. As a Connecticut citizen, my view is to disband this chaotic and ineffective board, and let the private sector do a much better job of providing a public service.”

No line of credit

When Fay mentioned “getting us to the point of execution,” she was referring to putting the retirement exchange into motion by arrangements toward hiring: 1) an outside firm to handle administrative and management functions; and 2) a firm to provide investment consulting services. Although proposals were solicited from prospective vendors, no one has been hired -- and now there’s doubt as to when, if ever, that will happen.

A big reason for that doubt was the pronouncement during Friday’s meeting by a representative of Melissa McCaw, Lamont’s budget chief , that her agency, the Office of Policy and Management (OPM), does not support the CRSA’s use of a $1 million line of credit from the state treasury, which had been contemplated before Lamont took office last January.

Up to now, the CRSA has been operating with $380,000 that had been collected in donations, mostly from companies in the financial field, by a predecessor retirement board that was disbanded once the CRSA was created in 2016. The $1 million credit line has been viewed a “bridge” loan for the CRSA to keep operating until it became self-sufficient by signing up enough workers (200,000 is a recent estimate) to make payroll-deduction contributions over the long term.

But McCaw, who by statute is a member of the CRSA board, says there aren’t enough solid projections of how soon the CRSA would be able to survive on its own and repay the money to the state treasury, according to her representative at Friday’s meeting, OPM budget analyst/economist Manisha Srivastava.

Srivastva said Friday that her boss “is not supportive of tapping a line of credit. But she is very interested in keeping the [CRSA’s] mission alive.”

She said questions need to be answered as to whether the CRSA is viable as originally designed, or whether it should try to join with the program of any of about a dozen states that have also legislated such programs. A small number of states, including Oregon and California, already have launched their programs.

The 2016 Connecticut legislation that created CRSA -- which required a tie-breaking vote by then-Lt. Gov. Nancy Wyman to get through the Senate -- requires companies with five or more employees to automatically enroll any worker in the CRSA “exchange’s" plan if he or she is not eligible for an employer-sponsored retirement plan. The employers would have to deduct 3% of a worker’s salary and send it to the CRSA for deposit in the IRA. Workers could opt out, in writing.

Although other states’ plans are similar, there still might be significant differences to reconcile before the CRSA could hook onto another state’s program. Other uncertainties stem from new federal legislation affecting retirement savings, as well as the Trump administration’s filing of briefs in support of a pending lawsuit against California’s program by a taxpayer’s association. The administration opposes forcing companies into so-called auto-IRA plans.

‘Unfair advantage’

In this state, the Connecticut Business and Industry Association calls the CRSA “another example of government entering into an industry and giving itself an unfair advantage over the private sector. Connecticut’s requirement that anyone without an employer-sponsored plan be automatically enrolled ... will cut out competitors and force state residents into investing their retirement savings through a quasi-public agency that uses Gmail for official communications.”

Fay, as CRSA’s only employee, does use a Gmail account for her official business. She works out of her home in West Hartford, where she serves as a Republican member of the local town council. She also ran unsuccessfully for the state House of Representatives in 2018.

State Senate Republican Leader Len Fasano, a CRSA critic who opposed the 2016 legislation, said that Fay’s indignant email “speaks to the truth that this idea is better served by the private sector.”

CRSA board Chairman Scott Jackson said last Friday that financial and political factors have changed in the four years since the CRSA legislation was conceived and drafted, and the board needs to produce “a fiscal analysis that is based on [current] reality.” Jackson will leave his current job as state revenue services commissioner Jan. 16 to join newly elected New Haven Mayor Justin Elicker as his chief administrative officer. He resigned as CRSA chairman at the end of Friday’s meeting. Lamont appointed Walsh, an OPM official, to replace him as CRSA chairman in recent days.

Recognizing that the CRSA is supposed pay for itself and not cost taxpayers anything, board member Thad Gray likened it to a start-up company that needs a second round of funds before it can break even. Gray said “if I were a venture capitalist” investing in the CRSA, he’d tell his co-investers: “I would say we’re out of business.”

Jon Lender is a reporter on The Courant’s investigative desk, with a focus on government and politics. Contact him at [email protected], 860-241-6524, or c/o The Hartford Courant, 285 Broad St., Hartford, CT 06115 and find him on Twitter: @jonlender.

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