With the support of the state treasurer and AARP, the Senate and House majority leaders are pushing legislation that would create a state-run retirement program for private-sector employees over the opposition of insurers and private investment advisers.
Senate Majority Leader Martin Looney of New Haven and House Majority Leader Joseph Aresimowicz of Berlin Tuesday urged passage of legislation that would make Connecticut the second state after California to offer a state retirement trust program.
The two Democratic leaders acknowledged that California has yet to resolve key questions about its program, including whether it would enjoy the same tax advantages to savers as 401(k) or individual retirement accounts.
The goal is to offer a low-cost retirement savings program that could be offered as a payroll deduction plan to Connecticut workers who lack access to retirement programs through their jobs.
“One of the things we’ve seen, unless there are payroll deduction plans offered, the level of participation is very low,” Looney said. “That’s why I think a payroll deduction component of this is critical.”
Aresimowicz said the average Social Security benefit in Connecticut is about $15,000. Too many residents have no retirement plan other than Social Security, a program created in 1935, when the average life expectancy was 62.
“Our senior population is going to be doubling within the next 10 years, and we’re going to continue to have to provide services for these folks,” he said.
AARP says more than 600,000 workers in Connecticut have no access to a retirement plan. For those 65 and older, Social Security accounts for 87 percent of total income for low-income households and 70 percent of middle-income households.
California adopted its plan in 2012, but it has not completed a market analysis and feasibility study mandated by the legislation.
Looney and Aresimowicz could not precisely predict what the program would cost the state. The goal is a program the state could run for administrative fees of no more than 1 percent.
“What we’re saying is let the state of Connecticut provide this product,” Aresimowicz said.
Looney said the program would be self-sustaining and low-risk with a moderate rate of return likely tied to the 30-year Treasury bond rate.
Treasurer Denise Nappier and Comptroller Kevin Lembo have endorsed the concept, but the bill is opposed by the Middlesex and Windham chambers of commerce, the Insurance Association of Connecticut and the National Association of Insurance and Financial Advisors.
The legislation would put the state in competition with private savings plans, and businesses say that administering a payroll deduction system would impose a cost on them.
“Connecticut already places many mandates on its businesses,” Charles Firlotte, president of the Aquarion Water Co., said in testimony submitted to the Labor and Public Employees Committee.
Last year, a similar bill cleared the committee process, but died from inaction in the Senate when the session ended.