Some Connecticut officials want to set up a state-run retirement plan for small businesses, self-employed individuals and not-for-profits.
The Connecticut plan administrative fees could be about 50% lower than the fees at conventional plans, according to Connecticut Comptroller Nancy Wyman and state lawmakers who are working with her to develop the program proposal.
Program organizers believe the program would be the first state-run retirement plan aimed at residents in the private sector.
Organizers came up with the idea because of reports that only about 25% of Connecticut businesses with fewer than 100 employees offer 401(k) plans. The high cost of administering the plans is one barrier that keeps small businesses from offering them, Wyman says.
Wyman’s office already administers three retirement plans for state employees: A 401(a) defined contribution plan, a 457 deferred compensation plan, and a 403(b) retirement savings plan.
The American Society of Pension Professionals & Actuaries, Arlington, Va., has come out against the Connecticut state-run retirement plan program proposal.
If enacted, the proposal would produce a giant bureaucracy that would kill a healthy 401(k) market in the state without necessarily offering residents better retirement savings opportunities, ASPPA officials say.
“A free and competitive market is the best system for 401(k) plans in Connecticut or any other state,” says Michael Callahan, a past president of ASPPA and founder of Pentec Inc., Southington, Conn., a pension firm. He is calling for the creation of an educational program to encourage more employers to offer 401(k) plans.