Let us help you navigate Connecticut's state mandated retirement plan, MyCTSavings
In April of 2022, the Connecticut Retirement Security Program (CRSP), led by the State Comptroller and State Treasurer, began registration for its newly generated MyCTSavings retirement savings program. Created in 2016, the CRSP was appointed with the task of addressing the retirement crisis seen amongst Connecticut workers. At that time, it was estimated that around 600,000 Connecticut employees lacked an employer sponsored retirement plan.
Nationally, all but three states have begun the process of implementing a state-sponsored retirement savings plan to address America’s retirement crisis. In Connecticut, CRSP’s solution is MyCTSavings, which is designed to help Connecticut workers save for retirement, and mandates employers with five or more employees that do not offer a plan to join the MyCTSavings plan. It is estimated that up to 30,000 Connecticut businesses will need to add a retirement plan to comply with this mandate (Soule, 2022).
An employer that qualifies for offering the MyCTSavings plan includes one that does business in Connecticut during the applicable year. Additionally, they must have employed five or more employees in Connecticut on October 1 of the preceding year, paying them taxable wages of $5,000 or more. A qualified employer is also one that is not exempt from MyCTSavings.
An employee is eligible if they are 19 years of age or older, perform services within Connecticut whose services are not excluded, and have been employed by a qualified employer for at least 120 days.
An employer that already offers a qualified plan for their employees is not required to facilitate MyCTSavings. Qualified plans include those outlined in Section 401(a) (including without limitation plans described in Section 401(k)), 403(a), 403(b), 408(k) or 408(p) of the Internal Revenue Code of 1986, a governmental plan under section 457(b) of the Code, a retirement plan described under Section 501(c)(18) of the Code, or any other retirement arrangement approved by the Connecticut Retirement Secuirty Authority.
Deadlines to Comply
Three waves of deadlines were established to roll out the MyCTSavings program, based on employer size:
- June 30, 2022: 100+ employees (Passed)
- October 31, 2022: 26-99 employees (Passed)
- March 30, 2023: 5-25 employees
How the Plan Works
The MyCTSavings plan is a Roth Individual Retirement Account (IRA), which allows savings through automatic payroll deductions and offers the potential or tax-free withdrawals. The Comptroller chooses the investment options, the Plan Administrator is Vestwell State Savings, LLC, dba Sumday Administration (“Sumday”), the Investment Manager is Lockwood Advisors, Inc., and the IRA Custodian is The Bank of New York Mellon Investment Servicing Trust Company. The Fund Managers include Fidelity Investments, Schwab Asset Management and/or The Vanguard Group, Inc.
Employers must provide employees with a participation disclosure that describes the plan within 30 days of hire. Then, employees have 60 days to opt out, if they choose. In terms of default contribution rates, this is 3% of total pay, which can be adjusted. Importantly, employers are not eligible to make contributions into the plan, and in 2023, employees can contribute up to $6,500 into both traditional and Roth IRAs. If the employee is over the age of 50, they can contribute up to $7,500.
Available Investment Options
The Target Retirement Date Portfolio and the Strategic Portfolios are available options to employees enrolled in MyCTSavings. The Target Retirement Date Portfolio includes investment options with a specific target date for retirement, based on the employee's age. When the target date is distant, the funds focus on a growth objective. This becomes more conservative as the target date approaches, and when the target date has been reached, the investments are transferred into the Target Retirement Date Portfolio: Retirement Age until they are withdrawn.
The Strategic Portfolios offer a range of options based on employee investment objectives. These options include MyCTSavings Balanced Portfolio, MyCTSavings Cash Preservation Portfolio, MyCTSavings Conservative Growth Portfolio, MyCTSavings Growth Portfolio, MyCTSavings Income Portfolio, MyCTSavings Income and Growth Portfolio, and MyCTSavings Moderate Growth Portfolio.
Now is the perfect time to evaluate your workplace retirement plan options. MyCTSavings is one way to comply with the mandate, but it may not be the best option for your business. For instance, a traditional 401(k) has a higher contribution limit of $22,500, or $30,000 for employees over the age of 50, as seen in the Pros & Cons Tables below. Including employer contributions into the 401(k), this limit increases to $66,000 for employees under the age of 50, and $73,500 for those over the age of 50.
If you are interested in learning more about providing your employees with your own flexible plan, please complete the form below today, and someone from our team will be in touch with you shortly.
Do employers have to facilitate this State program?
Yes. Any employer, whether for profit or not for profit, must facilitate the State’s program if:
- It employed five or more employees in Connecticut on October 1st of the previous calendar year, and;
- It paid at least five employees $5000 or more in taxable wages in the previous calendar year, and;
- It does not currently provide a qualified, employer-sponsored retirement savings plan
Employers who are exempt from MyCTSavings include:
- Those who currently provide a qualified, employer-sponsored retirement savings plan
- Those who were not in existence at all times during the current and preceding calendar years
- Those employing only individuals whose services are excluded under the unemployment compensation law
Are there any fees for employers to participate?
There are no employer fees. Employers are not required nor permitted to make employer contributions to the program.
What is considered to be a qualified, employer-sponsored retirement plan?
An employer-sponsored retirement plan includes a plan qualified under Internal Revenue Code sections 401(a) (including a 401(k) plan), qualified annuity plan under section 403(a), tax-sheltered annuity plan under section 403(b), Simplified Employee Pension plan under section 408(k), a SIMPLE IRA plan under section 408(p), or governmental deferred compensation plan under section 457(b). It does not include payroll deduction IRAs.
Is there a minimum age to be eligible to participate in MyCTSavings?
Yes, your employees must be at least 19 years of age to be enrolled in the program.
Do other states have programs like this?
Yes, similar programs are up and running in other states, including California, Oregon, and Illinois. And many other states are about to launch state-sponsored retirement savings programs or are in the process of passing legislation to support them, including Colorado and New Mexico, among others.
Is there a penalty for late or omitted payroll deductions?
Failure to remit deductions in a timely manner violates Connecticut law, including wage and hour requirements. The State may impose penalties for these violations.
What if I already offer a qualified retirement account?
Plans are exempt from facilitating the program but must certify their exemption online. Simply enter the secure online portal at myctsavings.com and provide your EIN and the Access Code sent to you. Then, in the space provided, certify that you offer a plan.
What if a business doesn't register for the program as required by law?
Any business with five or more employees in Connecticut will be required to facilitate the MyCTSavings program, unless it offers a qualified, employer-sponsored retirement plan. The program will be monitoring businesses for compliance and will try to assist businesses in getting enrolled if needed. That said, if a business falls out of compliance and fails to register, an investigation could occur and there may be penalties.
How does enrollment work?
First, you’ll be asked to provide certain information about your business and employees. The program asks only for the basic information necessary to set you up as an employer and to set up your employees' accounts. You’ll get information to share with your employees that will include instructions for them. After that, you’ll start the payroll contributions for the employees who choose to stay in the program.
What do employees need to do after I enroll them?
Your employees can choose to stay automatically enrolled in MyCTSavings or opt out; they have 30 days to decide after you add them to the program. If they stay enrolled, the payroll deductions that they elect and that you set up for them in your employer portal will start as soon as your next payroll. If they choose to opt out, they will be removed automatically from the program and can always rejoin later.
What does automatic enrollment mean?
As soon as you add your eligible employees, their payroll contributions will start, unless the employees have opted out.
Do employees need to fill out paperwork to enroll or make changes?
Employees are enrolled automatically and do not need to fill out any paperwork. Once enrolled, employees can manage most account functions online. But, if needed, there are offline forms available for certain account changes; these forms can be downloaded, filled out, and sent in. MyCTSavings customer service team is also available if your employees need any additional help or have other questions.
What do employers need to facilitate the State's program?
To enroll, MyCTSavings just need your EIN and the Access Code provided to you via email or letter. After that, you’ll provide a list of your employees and your payroll information. And 30 days later, you’ll need to update your participating employees’ contribution rates within your payroll. From that point on, you’ll just need to keep your employees’ payroll contributions and staff list up to date.
If I offer MyCTSavings to my employees now and then decide to offer a qualified retirement plan later, what do I do?
Employers that choose to introduce a qualified retirement plan after enrolling employees in the MyCTSavings program should contact the client services team at 1-833-811-7435 and request to “unregister.” They will begin the manual process of exempting your business from the program and adjusting your employees’ accounts as needed. You should communicate what is happening to your employees and inform participating employees that they can still access their MyCTSavings account after you’ve exempted out of the program.
Are seasonal employees eligible?
Yes, if they work for you for at least 120 days, which is the window for you to enroll new hires. If they work for fewer than 120 days, you will not need to enroll them.