OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

SB-249

AN ACT PROMOTING RETIREMENT SAVINGS.

AMENDMENT

LCO No.: 3592

File Copy No.: 276

Senate Calendar No.: 216


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 15 $

FY 16 $

Revenue Serv., Dept.

GF - Revenue Impact

See Below

See Below

Municipal Impact: None

Explanation

The amendment specifies that the Individual Retirement Accounts (IRAs) offered under the bill must be Roth IRAs. This eliminates the potential revenue loss of $66.1 million - $165.2 million in FY 15 and FY 16 identified in the fiscal note on the underlying bill, and instead results in a potential revenue loss beginning in FY 19 at the earliest.1 The magnitude of the revenue loss is dependent on the investment earnings of contributions to, and timing of withdrawals from, the Roth IRAs established under the amendment.

The revenue loss is potential as the bill specifies that the plan established under the bill cannot be open for enrollment until the retirement plan's Individual Retirement Accounts qualify for favorable tax treatment under the Internal Revenue Code. It is unclear how such qualification would be established, and whether that qualification would result in income being excluded from adjusted gross income (AGI) for state income tax purposes.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

1 Contributions to Roth IRAs are not deductible for income tax purposes at the time the contribution is made, but earnings and qualified withdrawals are not taxed. Generally, earnings withdrawn within five tax years of the contribution are subject to penalty and taxation.