Here’s a shocking stat: More than 600,000 private-sector employees in Connecticut don’t have an employer-sponsored retirement savings plan. To encourage more employees in the state to save for retirement, Connecticut launched the MyCTSavings Retirement Program (MyCTSavings).
As with similar state retirement programs, MyCTSavings brings a mandate for many small businesses: Offer a retirement plan to their employees or facilitate MyCTSavings.
If you’re a Connecticut employer, you may wonder if the new program applies to you. Spoiler alert: It applies to most employers. Read on to learn the ins and outs of MyCTSavings.
5 Things employers need to know about MyCTSavings
MyCTSavings is the state of Connecticut’s retirement savings program. Through MyCTSavings, employees working in Connecticut can save for retirement using an automatic enrollment Roth IRA. This means employees make contributions with after-tax dollars through payroll deductions. By mid-2023, all Connecticut companies with five or more employees must facilitate MyCTSavings or offer a qualified retirement plan.
Employers who choose to facilitate MyCTSavings must register employees with the MyCTSavings portal after hiring them. From there, employees will have 30 days to opt out before being automatically enrolled at the default contribution level of 3%.
You must remit employee contributions to their workers’ accounts each time they run payroll. Remember that you do not match or contribute to the employee’s MyCTSavings account, and you’re not considered a plan sponsor.
1. Not all businesses have to use MyCTSavings
In early April, approximately 30,000 Connecticut employers received letters informing them of the MyCTSavings program and the requirements to participate.
You must facilitate the MyCTSavings program if you have five or more employees who are paid more than $5,000 per year.
However, you do not need to facilitate MyCTSavings if you already offer a qualified retirement plan alternative. Qualified retirement alternatives include:
- 401(a), including a 401(k) plan
- Qualified annuity plan under section 403(a)
- Tax-sheltered annuity plan under section 403(b)
- Simplified Employee Pension plan under section 408(k)
- SIMPLE IRA plan under section 408(p)
- Governmental deferred compensation plan under section 457(b)
2. There’s a limit to how much employees can contribute
MyCTSavings uses the same contribution limits all Roth IRA accounts are subject to. Employees can contribute up to $6,000 per year from their paychecks into their MyCTSavings account.
If the employee is at least 50 years old, they can contribute $7,000 per year.
3. Your MyCTSavings registration deadline depends on size
Your registration deadline for MyCTSavings depends on how many employees you have. For some, the deadline is already here. For small businesses, your registration deadline is around the corner.
Take a look at the following registration deadlines based on business size:
- June 30, 2022: Employers with 100 or more employees
- October 31, 2022: Employers with 26 to 99 employees
- March 30, 2023: Employers with 5 to 25 employees
Want more information? Head on over to the MyCTSavings website.
4. There are penalties for missing the deadline
The legislation establishing MyCTSavings contains language establishing penalties for non-compliant employers. If a qualified employer fails to enroll a covered employee, the statute says:
“… the covered employee or the labor commissioner may bring a civil action to require the employer to enroll the employee and may recover the costs and reasonable attorney’s fees as allowed by the court.”
Additionally, if a qualified employer fails to remit contributions to the program in a timely manner, the statute states:
“… violators are punishable by imprisonment and fines and on a sliding scale depending on the amount of wages involved (i.e., if unpaid wages are more than $2,000, guilty of a class D felony, with imprisonment of up to five years, a fine of at least $2,000 but not more than $5,000, or both).”
Already offer a qualified retirement program? You can certify your exemption from the MyCTSavings mandate here.
5. Help is available!
Patriot and Vestwell have partnered to offer affordable retirement plans for small businesses in Connecticut and across the United States. Vestwell’s digital retirement platform directly integrates with Patriot’s payroll software, making it easier for you to offer and administer a company-sponsored 401(k). By combining technology with best-in-class retirement plans, Vestwell has created custom programs for Patriot customers that are incredibly affordable and easy to set up and use.
If you’re a Connecticut employer interested in setting up a 401(k) account for your business instead of facilitating MyCTSavings, you can contact Vestwell to determine if you are eligible to receive up to $16,500 in tax credits, which can help cancel out administration costs.
Interested? Learn more here.This is not intended as legal advice; for more information, please click here.