Dan Haar: Thousands of employers comply with state's new retirement plan but many don't

Lisa Bielawski, vice president of the Thomas Hooker Brewing Co., is one of the more enthusiastic supporters of the state’s retirement savings plan, which is mandatory for companies with five or more employees that don’t already offer one.

She researched multiple retirement plans for the Bloomfield-based craft beer maker, one of the state’s oldest – and she also signed up to participate with payroll deductions for herself after Hooker joined the state plan.

Bielawski found the state plan, known as MyCTSavings, to be far easier and, with no direct administrative costs, obviously cheaper than traditional, commercial 401(k) plans on the market. And she said, “It takes a lot of the stress out for the employees.”

She and Hooker Brewing are part of an early wave of the state retirement plan for non-government workers. The plan, run by the Comptroller, has seen participation mushroom from 876 companies at the end of 2022, just before Sean Scanlon was sworn into the office, to 3,436 as of April 4, with more than 10,000 people enrolled.

There are two ways of looking at this progress in the MCTSavings plan — two ways that were equal by the numbers as of last week.

The Comptroller’s office identified 29,624 companies with at least five employees that were not known to have a retirement plan in place. Among those, 14,897 had responded as of April 4 to the Comptroller’s gentle reminders that they had until March 30 to either show they had a retirement plan in place, or sign up for the new state plan.

More than 11,000 showed they had plans in place and a few thousand – 3,436 as of last week – signed up.  

That’s impressive and way ahead of Scanlon’s target. It’s hard to get 15,000 butchers, bakers and candlestick-makers to respond to anything in these busy times.

On the other hand, that leaves an almost identical number of companies — 14,727 — that have yet to report back to the state on their status. Under the law adopted in 2016, Scanlon could sue any company that failed to respond, but that would be absurd and Scanlon has said early and often he would not even think about doing such a thing.

His immediate response as the March 30 deadline passed was to push back the deadline to August 31. By late summer, of course, we will still almost definitely have thousands of companies out of compliance – never a great specter.

No one knows this better than Scanlon. “Last summer I busted my ass going around the state,” he said, prodding people to sign up for the child tax credit of up to $750 per family.  He was the lawmaker who had led the charge for that credit. Free money, and still only about 70 percent of eligible parents took the cash.

Scanlon is upbeat about participation in MyCTSavings. “I’m a glass-half-full guy,” he said.

The reasoning: 80 percent of the companies on the list were notified of the plan just this winter as part of a wave of the smallest firms, with 5 to 24 workers. “We’ll have thousands of additional businesses complying,” he said. “If we continue to promote this thing, the interest is there.”

And for those that don’t comply? There’s no penalty at the moment but a bill working its way through the General Assembly would levy fines, with amounts yet to be determined. The latest discussions call for $500 to $1,500 per year, depending on the size of the company.

It does seem intrusive for the state to enforce a mandatory retirement plan with fines. Back in 2016, the idea generated opposition in the General Assembly as some said it was not the business of the state to compete with private retirement savings providers, nor to mandate that companies offer a plan to their employees.

Then again, an estimated 600,000 private-sector workers in Connecticut don’t have a retirement plan through an employer. We know that a lot of those people will reach retirement without enough money to live.

Guess who will have to pay their expenses.  Hint: It’s not the governor of Florida or the senator from Texas.

Under the state law, employees are automatically enrolled for a 3 percent payroll deduction once their employers sign up. Anyone can opt out anytime with no penalty but few have done so, Scanlon said. Several states are negotiating to piggyback on Connecticut’s plan.

It’s a Roth IRA, meaning the savings are not tax deductible, but will be tax-free when participants take distributions years later.  That works well for low-paid workers who don’t benefit much, or at all, from a deduction now.

And it works well as part of a balanced retirement program – the reason Bielawski enrolled for herself at Thomas Hooker as a 15-year company veteran who has risen to become founder Curt Cameron’s right-hand person.

“It was convenience and honestly I’m not getting any younger, and having multiple options available for me, why not?” she said.

Some private money managers say they’re signing up small companies with more comprehensive and flexible plans now that the state requires participation. That’s a good trend if the law helps the industry.

Hooker Brewing has 65 employees, about half of them part-time, and more than a third have signed up for the state plan. Many are early in their careers, Bielawski said.

“They’re going to be happy when 15 years down the road they have something as opposed to nothing,” she said – capturing the reason why the law, intrusive as it may become for laggard firms, makes sense.