Lawmakers and public officials are lining up public support for a public retirement plan before the legislation is even written.
Senate President Martin Looney, D-New Haven, House Majority Leader Joe Aresimowicz, D-Berlin, and state Comptroller Kevin Lembo joined members of AARP Connecticut for a press conference Thursday to announce the results of a survey that found 61 percent of voters ages 35 to 64 support a public retirement plan.
“The survey that came out today already confirms what we’ve been hearing from many of our constituents,” Aresimowicz said. “There’s a real fear out there that they’re not going to be able to retire with dignity and they don’t want to rely on family and state services to make ends meet.”
Looney and Aresimowicz passed a bill two years ago that created the Connecticut Retirement Security Board, which is chaired by Lembo. The legislation passed largely along party lines.
However, Looney said he thinks the concept of a public retirement plan has “broad-based support in both the Senate and House.” He said it will be an easier sell this year because there will be a “specific” plan for lawmakers to debate.
The Connecticut Retirement Security Board recently released a report that found a public retirement program would need approximately $1 billion in assets to become financially self-sustaining. If everyone eligible to enroll in the program did so and contributed up to 6 percent of their earnings, then the program should be self-sustaining at the end of year two.
Lawmakers were clear that “there can’t be a cost to the state,” Lembo said. “There’s going to need to be a follow-up question about how you seed something like this and keep it going, but it’s got to be self-sustaining.”
The next step is to get the General Assembly to approve legislation to put a plan in place.
There’s an estimated 600,000 to 700,000 Connecticut residents with no access to a retirement savings account through a payroll deduction.
“People living on close, tight margins really are unable to save for retirement at all without having a payroll deduction,” Looney said.
Looney said the opposition to this comes from private marketers of these retirement plans.
“If the private sector were successful in doing this, then we wouldn’t need to be offering this bill in the first place,” Looney said.
But Eric Gjede, assistant counsel at the Connecticut Business & Industry Association, said there’s going to be a significant cost to employers to set up a payroll deduction to contribute to the plan.
He said the concept sounds great to the average person, but all the work for this is being dumped on top of the business community.
“We’re the ones who have to incur liability for sending over the contributions,” Gjede said.
And, Gjede asked, if this becomes the default retirement plan, what happens to all the people out there making their living selling retirement plans?
Lembo said there’s a hole in the marketplace and not everyone is being served. It’s not helpful for people to “mischaracterize” the concept, he said.
“What we’re up to is offering an alternative, not a replacement,” Lembo said.
He said the public plan will complement the private plans already offered in the marketplace.
Gjede said having another plan in the marketplace is not going to make people save more for retirement. In the short-term, he suggested that there should be an incentive for small employers to take part in multi-employer plans. In the long-term, he said the state should team up with the private sector and educate the public on the importance of preparing for retirement.
But Looney doesn’t believe the private sector is up to the task. Looney said fewer and fewer employers are offering retirement plans.
An estimated 68 percent of Connecticut employers offered plans in 2001 and only 58 percent offered them in 2012, he said.
Lembo said the AARP survey shows people acknowledge there’s a problem and “they support government being involved in some way” to help find a solution.