Christine Stuart photo

When it comes to creating a retirement plan for all Connecticut residents there are still more questions than answers as lawmakers seek to find ways to ensure residents are retiring on more than Social Security.

This year, Sen. Majority Leader Martin Looney and House Majority Leader Joe Aresimowicz teamed up to find a way to automatically enroll everyone in Connecticut that currently doesn’t participate in an employer-sponsored 401k or an Individual Retirement Account.

At the heart of the bill, which received a public hearing Tuesday is the automatic payroll deduction concept to get workers who normally don’t contribute to their retirement to participate in the state plan with a “guaranteed rate of return.”

What the rate of return will be and even how much money residents could contribute to the plan are questions that will need to be answered by the board that will oversee the trust where the money will be held. No state money is being contributed and lawmakers said employers won’t be expected to contribute money toward the plan.

However, Aresimowicz said employers will be responsible for setting up a payroll deduction for their employees. A former combat medic, who workers for one of the state’s largest unions, Aresimowicz said setting up a deduction for an employee is as easy as checking a box in Quickbooks.

“While products are out there in the marketplace, folks aren’t taking advantage of them,” Aresimonwicz said.

And the problem is getting worse, not better.

Looney said 43 percent of Connecticut workers between the ages of 25 and 44 were not covered by a retirement plan in 2010, the last time analysis was given.

But opponents of the legislation say if it’s a matter of educating the public about the need to save for retirement, then that’s what the state should be doing. It shouldn’t be forcing workers to participate in a retirement program where an appointed board will decide how much money a person receives during their retirement.

The Connecticut Business and Industry Association, the Insurance Association of Connecticut, and the Connecticut chapter of the National Association of Insurance and Financial Advisors is opposed to the bill.

“While we agree with the premise that people should be saving more for retirement, the solution put forward in this bill is a misreading of the problem,” CBIA Assistant Counsel Eric Gjede said. “This bill is a ‘supply’ answer to a ‘demand’ problem. There is no shortage of easily accessible IRA plans available to any Connecticut resident who walks through the door of their local bank.”

Currently, there are thousands of agents who are able to work with individuals on retirement planning, Catherine Ernsky, president of both the Ernsky Group and the National Association of Insurance and Financial Advisors Connecticut chapter, testified.

She suggested the state team up with the private sector and create a marketing campaign, in addition to embracing President Barack Obama’s new federal MyRa program.

Aresimowicz said the administrative costs for the state’s plan would be lower than 1 percent. He said administrative costs being offered in the marketplace are higher.

However, those who contribute to their retirement may not be able to do so tax free. The state of Connecticut would still need to obtain a waiver from the federal government to allow residents to make the contributions without a tax penalty.

The only other state with a similar plan is California, which adopted their retirement board in 2012. While the board has been meeting since last year it has yet to complete a market analysis and has yet to hear from the federal government about how it would be treated by the Internal Revenue Service.

In Connecticut, a similar bill died last year on the Senate calendar, but supporters believe they will succeed this year.