GOP, Business Advocates, Financial Advisors Unite in Opposition to Mandated State Run Retirement Funds

April 28, 2014

Financial Advisor John Sayour, Fairfield, Sen. Toni Boucher, Wilton and Hope Feller, Financial Planner, Westport at a press conference in Hartford regarding a state run retirement proposal.

Hartford, CT – Senator Toni Boucher (R-Wilton) joined by a group of Republican legislative leaders, business advocates and financial advisors like Hope Feller from Westport united today in opposition to Senate Bill 249, legislation that would create a state run retirement fund. The proposal would require Connecticut businesses to automatically enroll their employees if they do not offer an alternative of their own.

“The problem is not a lack of options. The problem is that many families are living paycheck to paycheck. They are working harder for less and don’t have enough money to invest in a retirement fund,” said Sen. Boucher a member of the Finance, Revenue and Bonding Committee.

Under the bill proposed in Connecticut, employers required to use the state-run retirement plan would also be required to automatically enroll employees and begin withholding 2% – 5% of their income to be deposited into the state-run retirement fund. An employee who chooses not to participate would have to opt out in writing every two years.

The state-run retirement plan would be managed by the State Comptroller’s Office and a special oversight board. Administrative costs associated with the bill would increase state spending by $8 million. The opponents also argued that government should not be undermining private businesses that already offer retirement fund services.

Hope Feller, Financial Planner from Westport said, “Right now for 50 dollars a year a worker can go into a bank or a financial institution and can open an IRA, (individual retirement account) using payroll deductions from their employer at no cost and no fiduciary responsibility to the employer – as a vehicle to save for retirement.”

“Perhaps state government needs to find a way, within existing resources, to educate the public about the importance of retirement savings and the opportunities already available to them, but state government should not be managing private retirement accounts,” said Sen. Boucher.

Senator Boucher, who has an extensive background in financial management, noted that another provision of the bill requires the state to procure insurance to protect the investments made by plan participants. However, insurance of this nature is costly and does not provide the same level of protection that individuals would receive for investments made with private institutions.

“It is virtually impossible to guarantee a certain rate of return in investment, leaving room for liability problems for the state,” Senator Boucher said. “Buying portfolio insurance to cover shortfalls is exorbitant and rarely done as the very high costs reduce the gain or return on the investment.”

Opponents of the state run retirement plan also note that no other state has successfully implemented one. California has been trying for over two years and still has not overcome the significant legal obstacles. Bills in at least ten other states have failed or stalled over legal and practical concerns.