The Middletown Press (Middletown, CT)
CT comptroller on a mission as retirement plan deadline nears
It’s a tough job, traveling around the state to a brewery, a chicken joint, a Polish grocery, a flower shop and more, to talk with small business owners and highlight a state retirement savings plan.
Sean Scanlon, the recently elected Connecticut Comptroller, was up to the task on Friday and yes it did beat a day in the office keeping track of the state’s money. Still, Scanlon’s tour for the MyCTSavings program, adopted in 2016 and finally getting underway in earnest this year, comes with a steep challenge.
Under the law creating MyCTSavings, every small business in the state with at least five employees must either tell Scanlon’s office it has a retirement plan in effect, or sign up for the public plan — by March 30. That means handing over the names of employees, who will then be contacted by Scanlon’s office and enrolled for automatic payroll deductions of 3% unless they opt out.
If it seems like an impossible task, it is. The state won’t have anything close to 100% compliance by a week from Thursday, with just a fraction of businesses on board now. There’s no penalty for not complying, though lawmakers might add a stick this spring.
Scanlon wants to hit as high a mark as possible, so he trekked to six businesses that already signed up for their workers to see how it’s going and to fly the state retirement plan flag.
At the Polmart grocery in the heart of New Britain’s Polish neighborhood, Scanlon, joined by state Rep. Peter Tercyak, DNew Britain, heard about founder and owner Margaret Mazur’s 20 years in the business. An immigrant from Poland, Mazur was the first business on Broad Street to accept credit cards in 2003, she said. Nowadays she also caters to the Ukrainian population and of course, that led to conversation about the remarkable solidarity between Poland and Ukraine since the Russian invasion began 13 months ago.
“How many kinds of Polish kielbasa do you have?” Tercyak asked. She smiled and didn’t give a number.
Mazur signed up for the program a couple of weeks ago, she told the two elected officials, two Scanlon staffers and two of us from the media. “Something came in the mail.”
Among her 20 employees, all of them Polish immigrants, Mazur said, “some of them will and some of them won’t” participate in the MyCTSavings program.
‘They don’t have enough money’
The plan was controversial when the General Assembly adopted it. Opponents said it was doing work that should be left for private money managers and financial firms. But the real issue is not the state heisting profitable work from industry. No, it’s that employees of small businesses that don’t offer retirement plans are often not well paid, and struggle to save for a retirement that seems a distant dream.
“They don’t have enough money to support themselves,” Mazur said. “They have to pay rent, they have to pay for utilities, they have to buy food.”
“I was raised by a single mother,” Scanlon told her, explaining that his mom, now 70, might have been a good candidate for MyCTSavings.
The program sets up Roth Individual Retirement Accounts, or IRA’s, for participating employees. That means that unlike traditional 401(k) plans, contributions are after-tax, not deductible in the year they are made — but all of the money, including capital gains and interest, is tax-free when participants take payments years later.
As a Roth IRA, the payroll deduction plan, as little as 1 percent, lets participants start and stop payments anytime they want and it has other flexible provisions.
In all, there are an estimated 600,000 Connecticut residents working fullor part-time who don’t have retirement plans, according to the MyCTSavings website. Many work for the roughly 22,000 businesses with 5 to 24 employees, which face the March 30 deadline. (Larger firms already had deadlines to report.)
As of March 14, Scanlon’s spokeswoman said, 1,953 employers had signed up for the program and 9,037 savers had enrolled. About one-third of the 22,000 businesses in the 5 to 24 tier offer retirement plans of their own — meaning thousands had yet to respond.
Scanlon told people Friday that 85% of employees who agreed to join the program have continued saving.
Brewing up the program
Connecticut is one of a very small handful of states doing a retirement plan for private sector workers. Why do it? Clearly, the state has a stake in the financial security of its citizens. Several states have asked Connecticut to run their programs, Scanlon said, so it looks like we’re headed toward being a mini-Fidelity Investments for better or worse.
It’s a tough slog getting it to take off. “We suck at financial literacy in this country,” Scanlon said — an understatement.
Employers don’t pay any money into the plan, though they need to do the payroll deductions.
In Bloomfield, Curt Cameron, founder and CEO of the Thomas Hooker Brewing Co., one of the state’s oldest and more successful beer-makers, told Scanlon he looked into 401(k) plans for his 65 employees.
“They’re extremely onerous…and they’re expensive,” Cameron said. “So when this came out, we’re like, ‘This is a great way to offer some kind of a savings plan.’”
Twenty-three of his employees have created accounts, Cameron said — as we took a grand tour of the impressive operation including his expansion into CBD-infused seltzers, Hooker’s fastest-growing product. Nothing beats a brew tour on a Friday afternoon in the spring as March Madness gets underway and Scanlon, previously a state Representative from Guilford and manager of Tweed New Haven Airport, had a lot of questions about that business.
We saw an oddity at the family-owned, 64-yearold Hancock Pharmacy in Meriden. The company, with four locations and 106 employees, already had a qualified retirement plan with a company match, but very few of the workers participated. The owners eliminated that plan, gave across-theboard raises and joined the new state plan, Greg Hancock said.
“The people that are in it, they’re pretty happy,” he said.
Whatever works to prod more savings by rank-and-file workers is a good thing. But the state needs to run this thing impeccably or it will be easy to look back and say it was the wrong path. In fact, the program didn’t get off the ground for a few years under a separate authority and recently moved to the comptroller’s office.
And as it turns out, some in the investment community are just fine with the competition. Rather than sign up for a plan that doesn’t have a full range of options, some small firms that didn’t previously offer savings programs for their employees have opted for private retirement plans.
“It’s a positive for me in my business,” said Raymond Bovich, a partner and wealth manager at Wooster Square Advisors LLC in New Haven, who said the cost of private plans has come down and the state plan is “not as flexible or robustly structured.”