Below is an update of the status of "An Act Concerning Small Business Retirement Plans" in Connecticut. According to the latest version, $500,000 will be appropriated to establish the plan. In addition, this latest version requires that all ongoing costs are passed along to the plan participants, and that all start-up costs will be recovered from the program assets. At a start-up cost of $500,000, it would require at least $50,000,000 in program assets simply to make this recovery cost be LESS THAN 1% of the total program assets. This is in addition to ongoing expenses.
When the bill was proposed, it was with the argument from the Comptroller that the fees would be reduced by 50% (though no one could answer the question of 50% of what?). With the above being the case, the plan sponsor fees MAY decline, however the fees plan participants will pay will most likely be higher than the current average.
General Assembly
File No. 603
February Session, 2008
Substitute Senate Bill No. 652
Senate, April 14, 2008
The Committee on Appropriations reported through SEN. HARP of the 10th Dist., Chairperson of the Committee on the part of the Senate, that the substitute bill ought to pass.
AN ACT CONCERNING SMALL BUSINESS RETIREMENT PLANS.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. (NEW) (Effective from passage) (a) As used in this section, "small employer" means a business with one hundred or fewer employees. (b) The Comptroller shall establish a tax-qualified defined contribution retirement program to provide retirement investment plans, including, but not limited to, those created under Section 401 of the Internal Revenue Code, of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended to self-employed individuals, small employers and organizations qualifying as tax-exempt pursuant to Section 501(c)(3) of said Internal Revenue Code. In administering such plan, the Comptroller shall seek to minimize costs by helping small employers and individuals purchase retirement savings plans, arrangements and investments through economies of scale, standardization and other measures. (c) In carrying out the provisions of this section, the Comptroller shall contract with a third-party administrator for the management of such plan or plans and shall recover from program assets expenses incurred to initiate, operate and administer the program established pursuant to subsection (a) of this section.
This act shall take effect as follows and shall amend the following sections:
Section 1
from passage
New section
CE
Joint Favorable C/R
APP
APP
Joint Favorable Subst.
The following fiscal impact statement and bill analysis are prepared for the benefit of members of the General Assembly, solely for the purpose of information, summarization, and explanation, and do not represent the intent of the General Assembly or either chamber thereof for any purpose:
OFA Fiscal Note
State Impact: FY 09 $500,000
Note: GF=General Fund
Municipal Impact: None
Explanation
The bill requires the comptroller to establish a 401(k) plan for self-employed individuals, employers with 100 or fewer employees, and certain nonprofits. The bill specifies the program is to be administered by a third party and the plan design must include a fee to participants in order to recover costs associated with the program.
Funding in the amount of $500,000 is appropriated to the Comptroller's Office in sHB 5021, the Appropriations Act, as favorably reported by the Appropriations Committee, to establish the program. The funding will be used as follows: $125,000 for the preparation of an Employee Retirement Income Security Act (ERISA) compliant document plan, $125,000 for production of educational and marketing materials, $100,000 for production and distribution of documents and retirement planning tools, $150,000 for advertising, mailing, and outreach to small business.
It is estimated that there are approximately 500,000 employees of businesses with 100 or fewer employees that do not currently participate in a retirement plan. The amount of time it takes the state to recover funds appropriated for the program will be a function of the fee charged and the level of small business participation.
OLR Bill Analysis
SB 652 AN ACT CONCERNING SMALL BUSINESS RETIREMENT PLANS.
SUMMARY:
This bill requires the state comptroller to establish a tax-qualified defined contribution retirement program to provide retirement investment plans, including 401(k) plans, to (1) self-employed individuals, (2) businesses with 100 or fewer employees, and (3) certain nonprofit organizations. In administering the plan, the comptroller must seek to minimize costs by helping small employers and individuals purchase retirement savings plans, arrangements, and investments through economies of scale, standardization, and other measures.
The bill requires the comptroller to (1) contract with a third-party administrator to manage the plan or plans she creates and (2) recover from program assets the expenses incurred to initiate, operate, and administer the program.
EFFECTIVE DATE: Upon passage
COMMITTEE ACTION
Commerce Committee
Joint Favorable Change of Reference
Yea 14
Nay 5
(03/13/2008)
Appropriations Committee
Joint Favorable Substitute
Yea 32
Nay 21
(03/28/2008)
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