Boucher, Frantz, Fasano Propose Small Business Retirement Plan Marketplace

March 8, 2016

Senate Republicans Propose a Small Business Retirement Plan Marketplace:
Alternative to a State Administered Public Retirement Plan

Hartford – Senator Toni Boucher (R-Wilton), Senator L. Scott Frantz (R-Greenwich), & Senate Minority Leader Len Fasano (R-North Haven) today unveiled a proposal to better help Connecticut families save for retirement by making private sector retirement savings plans more accessible to small businesses.

The proposal calls for a marketplace set up by the state to promote low-cost, high-quality plans offered by the private sector. This proposal is not a mandate, but rather involvement in the marketplace would be completely voluntary for both employers and employees. It would promote participating in retirement savings plans and educate small employers on plan availability.

This proposal is based on the Washington Small Business Retirement Marketplace, which was passed with bipartisan support in the state of Washington last year with the backing of AARP and the Securities Industry and Financial Markets Association (SIFMA). A similar proposal was also passed in New Jersey this year.

“This is a balanced approach that uses the power of the state to bring together employers and private sector financial service organizations to promote participation in private retirement plans. The Washington model is a one-stop-shop for employers to quickly identify and enroll in qualified private plans, significantly lowering their administrative costs and the risk associated with trying to investigate and choose plans on their own,” said Sen. Frantz.

The Washington model includes a small-business retirement plan marketplace managed by the state Department of Commerce. The director of the marketplace is tasked with working with the private sector to establish a program that connects eligible employers with qualifying plans. The director must also approve a diverse array of private retirement plan options. Participation in the marketplace is completely voluntary for both employers and employees, but only those who are self-employed, sole proprietors or employers with fewer than 100 employees are eligible to participate. The Washington plan is funded with an appropriation of $100,000 in 2015 and $50,000 in 2016-2018 for implementation of the legislation.

Republicans are sharing this idea as an alternative to the Democrats’ state administered public retirement plan proposed in H.B. No. 5591. The state would need about $1 billion in assets to make the Democrats’ proposed plan sustainable.

“With a steady outflow of individuals and business hampering Connecticut’s financial development, the state should be looking for ways to bolster its remaining successful industries,” said Sen. Boucher. “Retirement planning is one area in which there are an abundance of top notch providers, yet Democrats are proposing the state run a single, mandated plan for private sector workers. The plan creates a new bureaucracy with which private companies will have to contend, increasing the demands on their time. Participation is nominally voluntary, yet firms with more than five employees would be required to automatically enroll their employees, and would have to opt-out of the program, rather than opt-in. This is not a good time to impose further burdens on businesses that, in recent years, have been saddled with an ever expanding number of government mandated payments.”

Sen. Fasano added: “We all agree that people should be encouraged to invest in their retirement. Those who have reliable retirement savings will live life more comfortably in their later years with less need for government supports and services. However, we disagree with the approach of HB 5591.

“While well intentioned, the proposal to create a state administered public retirement plan is an unaffordable new layer of bureaucracy in state government that would place more financial burdens on an already struggling state budget. Even the state Retirement Security Board acknowledges the questionable financial sustainability of the program should participation and contribution levels not match assumptions. We should not be placing additional mandates on our employers. Nor should the state be picking winners and losers, displacing a large and vital segment of our private sector retirement planning and investment businesses.

“The state should not be getting in the way of business. We should be looking at ways to better support our businesses that already offer these services and connecting people to all the great savings options that exist in the market,” said Sen. Fasano.

Attached please find a comparison on the Washington model and the Democrats’ proposed HB 5591. Also attached are statements from AARP in support of the Washington plan.

Attached please find a comparison on the Washington model and the Democrats’ proposed HB 5591. Also attached are statements from AARP in support of the Washington plan.