State Law Sparks Retirement Savings for Workers
Mike Edwards, a retired police officer with a pension, became an administrator at a small trade school in -Waterbury two years ago. He wanted to keep putting funds aside for his retirement, but it wasn’t easy—until a new state law took effect.
That law finally launched MyCTSavings, a state-facilitated retirement savings option for private employees that had been in the works for years. AARP Connecticut advocated for the law.
When Edwards, 55, was first hired as the educational coordinator for the Manufacturing Alliance Service Corp., the nonprofit trade school didn’t offer a retirement plan.
But the school signed up for a pilot program of MyCTSavings that launched in October 2021. Edwards jumped at the chance to grow his nest egg beyond his police pension and other savings. Now he’s socking away the maximum contribution—$7,500 in 2023 for those 50 and older—into a Roth IRA available through the state savings program.
Anyone can open a Roth IRA on their own, but many people don’t go through the trouble. It’s much easier when it’s done through a payroll deduction, Edwards says. “You just learn to live on less money,” he says. “Once you become accustomed to it, it becomes the norm, and it accumulates down the road.”
Connecticut started rolling out the savings program statewide in April 2022. It is one of a half-dozen states to facilitate an active retirement savings program for private-sector workers.
Closing the retirement gap
In Connecticut, private employers with more than 25 employees and no retirement benefits had to enroll in MyCTSavings last fall and allow workers to sign up—or offer their own retirement plan.
About 1,100 private companies have joined, according to Connecticut State Comptroller Sean Scanlon, whose office oversees the program. More than 7,000 employees have funded accounts, he says, and an additional 15,000 have their first contribution pending. The average contribution is $33 per paycheck.
Scanlon says the current compliance rate is about 50 percent. There is no penalty right now for businesses that don’t comply, but the legislature could revisit that. He expects more companies to participate as awareness grows. The program will expand this year with the addition of smaller businesses; about 24,000 companies with five to 25 workers were required to sign up by March 30.
About 600,000 private-sector employees in Connecticut did not have access to an employer-sponsored retirement plan before the program was enacted, according to state data.
Scanlon says the retirement option is designed to help workers who don’t have the time or the financial literacy to take this step on their own. He hopes the program will help “close that retirement gap” between those who have employer-based retirement plans and those who don’t.
Social Security benefits often aren’t enough to cover rent, food, medical care and other basic needs, Scanlon says. The average Social Security benefit for retired workers nationally is $1,827 per month.
John Erlingheuser, AARP Connecticut’s advocacy and community outreach director, says the program is good for workers and businesses and could lower demand for social services.
Cristina Rouvalis is a writer living in Pittsburgh.
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