State Senator Donald E. Williams, Jr.
April 21, 2008
1st of its Kind Universal 401(k) Plan Hits National Radar Screen
AARP to launch Connecticut campaign to offset intense lobbying from special interest groups
Senator Williams, joined by Attorney General Blumenthal, legislative colleagues and members of AARP of Connecticut, shares news of the strong endorsement by AARP of S.B. 642, An Act Concerning Small Business Retirement Plans. (April 21, 2008)
Senate President Donald E. Williams, Jr., joined Attorney General Richard Blumenthal, House Majority Leader Chris Donovan, AARP National Director of Government Relations David Sloane, and dozens of concerned citizens at a news conference today to announce the beginning of an aggressive two-week campaign to help Connecticut become the first state to offer a universal 401(k) plan.
SB 652, AN ACT CONCERNING SMALL BUSINESS RETIREMENT PLANS, which was first announced in February and currently awaits action by the Senate, calls for the state to serve as a catalyst, pooling together employees from small businesses across the state in order to create an inexpensive 401(k) plan.
While support for the plan among members of the public and legislators has steadily grown, lobbyists for national special interest groups have mobilized against the legislation. They claim the plan would be too costly and that it would have no real benefit to workers or employers.
"Our proposal will help people save for retirement and instantly give our small businesses a real advantage over out-of-state competitors," said Senator Williams. "The fees associated with 401(k) plans have a disproportionate impact on people who work for small businesses. The result is that the majority of these employees don't have 401(k) plans, and at the same time, the small businesses are at a competitive disadvantage when it comes to recruiting workers. We're ready to take on the special interests and fight for working families and small businesses here in Connecticut."
"Connecticut has an historic opportunity to rescue a pension-less population--with virtually no liability or cost to the state," Blumenthal said. "Almost half the nation's citizens--the self-employed or employees of smaller businesses--have no retirement security. Financial insecurity can tarnish the golden years--imperiling individuals and the entire economy. A 'State K' would put the state behind small businesses and employees, empowering them to obtain vital benefits."
The AARP is launching an advertising campaign this week and releasing a report today that details the benefits of the plan for Connecticut families and businesses. The report, Analysis of Proposals to Broaden Private Pension Coverage and Retirement Savings through State-K Programs, details the growing retirement savings crisis in the nation, and specifically in Connecticut:
- "If enacted, SB 652 would represent the first effort by a state to actively assist small employers to establish retirement plans for their employees."
- The report finds that, "...nearly six out of 10 private sector workers in Connecticut do not participate in an employer-sponsored retirement plan," and, "...the prominent problem in the state of Connecticut is retirement plan coverage for the 36 percent of workers employed by small firms."
One significant reason for this problem is that due to their size, small businesses cannot achieve the economies of scale that make 401(k) programs useful to their employees; fees are too high to allow meaningful growth for retirement.
Our Proposal: Authorize the Comptroller's Office to submit a Request for Proposals (RFP) with the goal of establishing a state-administered deferred compensation plan--which would include a 401(k) plan--open to any small employer, including those who wish to participate by contributing on behalf of employees who participate. The plan would be initiated and administered by the Comptroller's Office.
Cost: Start-up costs are minimal and could be recouped through administrative fees (in the same way that plans on the market recoup fees) and repaid to the General Fund over the first few years. The net cost to the state would therefore be zero.
Background: The state of Connecticut currently operates a 401(a) defined contribution plan, an IRC section 457 deferred compensation plan, and a 403(b) retirement savings plan for state employees. According to the State Comptrollers Office (OSC), the new 401(k) plan, which would be regulated by the Employee Retirement Income Security Act of 1974 (ERISA), would not be open to state employees.
The cost reductions could enable access to plans for the employees of those small businesses that currently do not offer such retirement plans to their employees. The OSC estimates that investors could save about 50 percent on fees through a state-administered plan. This means that a typical worker earning $46,250--the average wage of a worker in the manufacturing sector--and saving 10 percent of their income would earn about $1.6 million toward retirement.
|
Senator Williams’ |
Listing of Senator Williams’ recent press releases and a Press Kit with official head shots and bio. |
Press Aide Derek Slap |
