Business, labor dig in heels over public pensions

HARTFORD >> Round two is about to begin in the fight between business and organized labor over Connecticut’s proposed public retirement plan.

Neither side got exactly what it wanted in the first battle that ended when Gov. Dannel P. Malloy signed a compromise bill earlier this year authorizing a study of howa retirement planwould work. Organized labor urged enactment of a plan while business lobbyists said no such plan is needed.

With a one-year study about to begin, businesses plan to reiterate their point that public retirement accounts are superfluous and will undermine Connecticut’s financial industry that already offers retirement plans and expert advice.

“We will be opposing this measure as we opposed the legislation,” said Eric Gjede, assistant counsel at the Connecticut Business and Industry Association.

Organized labor is pushing hard from the opposite direction.

“We are hearing from members, families and friends who don’t have retirement plans or pay exorbitant fees and they want this to happen,” said Matt Brokman, legislative and political representative for AFSCMECouncil 4. “We are going to be encouraging folks to show up and say why this matters.”

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help you find them. were as divisive between business and labor as the measure proposing the retirement plans. It failed in 2013 and was raised again this year, only to emerge as a study.

Lawmakers in Connecticut and other states are responding to a loss of private-sector pensions, a lack of access to employer-sponsored retirement accounts in smaller businesses and stagnant incomes that hamper effortsbyworkers tocontribute to retirement plans or company accounts. The intent generally is to establish a retirement fund in a state agency that would collect employee contributions, invest themoney and pay out benefits when employees retire.

The Connecticut Retirement Security Board was established to conduct a market feasibility study and must report to the legislature by Jan. 1, 2016. The study must include a market analysis, recommend a plan design based on the results of a market analysis and assess the financial feasibility.

The study will examine goals and design features of the plan, including likely participation rates, contribution rates, rate of account closures and rollovers, ability to provideemployerswith a payroll deposit systemand likely insurance costs.

It also will examine the legal compliance needed to make sure individual retirement accounts qualify for favorable federal income tax treatment.

One problem has already been spotted. The law requires that retirement plans are not treated as employee benefit plans under the Employee Retirement Income Security Act, known as ERISA, which sets minimumstandards formost voluntary, private pension and health plans. The state is exempt fromERISA, said state Comptroller Kevin Lembo, co-chairman of the Connecticut Retirement Security Board.

Lembo’s office said making a proposed plan subject to ERISA could affect employerswho could be considered plan sponsors subject to reporting requirements. It could also mean the state could face potential liability, something that is prohibited by the statute under which the idea is being studied.

Gjede said designing a private-sector IRA-style retirement plan that’s not treated as an employee benefit plan under federal rules could be difficult and doing otherwise “would run afoul of federal law.”

“That’s where the other states are studying this,” he said. “States are stuck at this point.”

Still, Lembo said the intent of the law is clear, even if some details are technical and complicated.

“Folks of a certain age have inadequate security in retirement,” he said. “Everyone agrees there’s a problem.”