Testifying before the state Senate Commerce Committee on behalf of the American Society of Pension Professionals & Actuaries (ASPPA), the Council of Independent 401(k) Recordkeepers (CIKR), and the Small Business Council of America (SBCA) was ASPPA Executive Director and Chief Executive Officer Brian Graff.
According to a news release, the three organizations opposed a similar bill last year to the current Senate Bill 971, which was tabled as lawmakers adjourned their session (See CT State 401(k) Plan Proposal Dies as Session Ends ).
Graff told lawmakers that the bill was not likely to expand plan coverage for small business workers and could actually do more harm than good.
He pointed out that a number of other states had considered and then rejected a similar approach, noting a recent Washington state report which he said supported private sector administration of IRAs or payroll deduction IRAs. Graff said Washington state officials cited potential liability issues as well as a costly start-up; they estimated initial costs of $3.4 million in the first two years and then ongoing annual costs of $2 million after that.
Graff said a Connecticut-sponsored plan would be subject to the Employee Retirement Income Security Act (ERISA) and that ERISA compliance would be complicated and costly. Graff noted that a number of other states have examined whether or not state administered 401(k) plans are a viable option to increase retirement coverage of their citizens – and every state has rejected such an approach.
The three groups instead supported a federal tax credit, enacted in 2001, that provides small businesses with up to a $500 annual tax credit for the start-up costs of a new small-business retirement plan.
If a small-business employer does not want to establish a retirement plan, it is generally because either the employer is not familiar with the available options, or the employer does not want the commitment of contributing to the plan for employees each year, Graff asserted.