OLR Bill Analysis

sHB 5591



This bill creates the Connecticut Retirement Security Authority (“authority”) to establish a program for individual retirement accounts (IRAs) for eligible private-sector employees, who are automatically enrolled in the plan unless they opt out. The authority is administered by a nine-member Connecticut Retirement Security Authority Board, which the bill establishes as a quasi-public authority under state law.

The bill's requirements apply to all “qualified employers,” i.e., private sector employers that employ at least five people each of whom was paid at least $5,000 in wages in the preceding calendar year. “Covered employees” are those who have worked for a qualified employer for a minimum of 120 days and are at least 19 years old.

Qualified employers must automatically enroll each covered employee in the program no later than 60 days after the employer provides the employee with informational material on the program the bill requires. If the employee does not affirmatively opt in (contribution options are provided) the employer must enroll the employee with a contribution of 3% of the employee's taxable wages (up to normal IRS limits). A covered employee may opt out of the program by electing a contribution level of zero.

The bill authorizes the authority to charge administrative fees to help defray the cost of the program.

It also contains penalties for employers that fail to remit contributions or that fail to enroll employees.

Under the bill, the individual IRAs will be established and maintained through the authority's program or a third-party entity in the business of establishing and maintaining IRAs. Program assets will be held in trust or custodial accounts meeting IRS requirements.

The bill requires the authority to offer traditional and Roth IRAs with a number of specified features, including options for age-appropriate target date funds and procedures for distributions from individual accounts in accordance with applicable IRS rules. In the absence of a participant's affirmative election, the authority will automatically select a Roth IRA (i.e., after tax contributions only). Interest, investment earnings, and investment losses will be allocated to each participant's IRA. A participant's benefit under the program will be equal to the balance in such participant's IRA as of any applicable measurement date set for the program.

The bill provides that the powers of the authority will be vested in a board of directors. The governor selects the board chair with the advice and consent of the General Assembly. The board or its executive director, if one is appointed, will supervise the program's administrative affairs and activities. The bill requires the board to adopt written procedures regarding, among other issues, annual budgets and hiring employees.

It requires the authority's board members to act with care and solely in the interests of the program participants. It also authorizes the attorney general to investigate violations of this requirement and to seek injunctive relief regarding violations.

EFFECTIVE DATE: Upon passage for the provisions creating the authority and its board, requiring the authority to establish procedures and the IRA program, and July 1, 2016 for the provisions conforming the authority with existing quasi-public law and payroll deduction law.


Under the bill:

1. “contribution level” means (a) the contribution rate the participant selects that may be (I) a percentage of the participant's taxable wages reported to the IRS or (II) a dollar amount up to the maximum annual IRS deductible amount; or (b) in the absence of the participant's affirmative election, 3% of the participant's taxable wages as required to be reported for federal tax purposes, or such other amount as the authority determines; and

2. “covered employee” means an individual who (a) has been employed by a qualified employer for at least 120 days, (b) is at least 19 years old, and (c) performs work that is covered by state unemployment compensation law.


The bill creates the authority and deems it a public instrumentality and political subdivision of the state. The bill specifies the authority is not a state department, institution, or agency.

The powers of the authority are vested in a board of directors, which consists of nine voting members, each a state resident:

1. the state treasurer and state comptroller who each serve as ex officio voting members;

2. one each appointed by the House speaker, House majority leader, House minority leader, Senate president pro tempore, Senate majority leader, and Senate minority leader who serves an initial term of four years; and

3. one the governor appoints who serves an initial term of four years.

The bill requires appointed members to include:

1. an individual with a favorable reputation for skill, knowledge, and experience in the interests of employees in retirement savings;

2. an individual with a favorable reputation for skill, knowledge, and experience in the interests of employers in retirement savings; and

3. an individual having a favorable reputation for skill, knowledge, and experience in offering retirement savings products or advice.

Each ex-officio member may designate his or her deputy or a staff member to represent the member at board meetings with the power to vote on the member's behalf.

All appointments must be made by July 31, 2016 and any vacancy must be filled by the appointing authority no later than 30 calendar days after the office becomes vacant. Board members serve without pay but are reimbursed, within available appropriations, according to standard travel regulations for all necessary expenses.

After the initial term all subsequent appointments are for six-year terms. Any member may be reappointed.

Board Officers and Employees

The governor, with the advice and consent of both houses of the General Assembly, selects a chairperson from among the board members. The board annually elects a vice-chairperson and any other officers it deems necessary from among its members.

The board may appoint an executive director and assistant executive director, who serve at the pleasure of the board. The executive director and assistant executive director are authority employees and are paid as the board determines.

The bill prescribes other administrative aspects of the authority's operations including designating an authorized officer or the executive director, if one is appointed, to supervise the administrative affairs and keep program records.

Oath, Expenses, and Surety Bond

The bill requires each board member to take the state oath of affirmation to uphold the state and U.S. constitutions, not later than ten calendar days after his or her appointment. The secretary of the state administers the oath which must then be filed in the secretary of the state's office.

Each board member authorized by a board resolution to handle funds or sign checks for the program, and any other authorized officer, must, no later than 10 calendar days after authorization, execute a $50,000 surety bond or, in lieu of that, the chairperson must obtain a blanket $50,000 surety bond covering the executive director, board members, and other employees or authorized officers. The authority must pay the cost of each such bond.


Under the bill, four board members constitute a quorum for the transaction of any business.

Conflict of Interest

The bill bans board members, officers, or employees from having any financial interest in any corporation, partnership, or other legal or commercial entity that contracts with the authority. Any individual who violates the ban will be fined not less than $50 a day up to $1,000, imprisoned not more than 30 days, or both.

But the bill explicitly states it will not be a conflict of interest under the bill or any other statute for a trustee, director, officer or employee of a bank, investment advisor, investment company or investment banking firm, or a person having the required favorable reputation for skill, knowledge, and experience in retirement savings, to be a board member, provided the trustee, director, or employee abstains from discussion, deliberation, action, and vote by the board in respect to a matter related to the authority and its actions in which the firm has a direct interest.

Board Procedures

The board, for the purpose of implementing the retirement security program established under the bill (see 3), must adopt written procedures for the following:

1. adopting an annual budget and plan of operations, including a requirement of board approval before the budget or plan can take effect;

2. hiring, dismissing, promoting and paying authority employees, instituting an affirmative action policy, and requiring board approval to create a position or make a hire;

3. acquiring real and personal property and personal services, including requiring board approval for any nonbudgeted expenditure greater than $500;

4. contracting for financial, legal, and other professional services, and requiring that the authority solicit proposals at least every three years for each service, except for any firm that contracts to provide custodial, recordkeeping, or other services for the provision of an IRA such solicitation must be at least every 10 years; and

5. using surplus funds to the extent authorized under the bill or by law.

Upon the authority's termination all its rights and properties pass to and become vested in the state of Connecticut.

Protection from Individual Liability

The bill provides protection from individual liability for any authority board member, director, or employee. This includes protection from civil liability for the debts, obligations, or liabilities of the authority.


The bill establishes the Connecticut Retirement Security Program (“program”) to promote and enhance retirement savings for private sector employees in the state. It authorizes the authority board to:

1. adopt bylaws to regulate the board's affairs and business;

2. establish criteria and guidelines for the retirement programs offered under the bill;

3. receive and invest moneys in the program in any instruments, obligations, securities, or property in accord with the bill;

4. contract with financial institutions or other organizations offering or servicing retirement programs;

5. employ attorneys, accountants, consultants, financial experts, loan processors, banks, managers, and other employees and agents as may be necessary in the board's judgment, and to fix the compensation of these individuals or agents;

6. charge and equitably apportion among participants the administrative costs and expenses incurred by the board because it exercised its powers and duties as granted under the bill;

7. borrow working capital funds and other funds as may be necessary for the start-up and continuing operation of the program, provided such funds are borrowed in the name of the authority only (the borrowings are payable solely from authority revenues);

8. make and enter into contracts or agreements with professional service providers, including, financial consultants and lawyers, as necessary for the board to perform its duties and execute its powers;

9. establish policies and procedures for the protection of program participants' personal and confidential information; and

10. adopt an official seal, maintain an office as the board may designate, sue and be sued in its own name, and do all things necessary to carry out the bill's provisions.

Administrative Fees

The bill authorizes the authority to require that a fee be charged and equitably apportioned to each participant to defray the costs of the program. The authority determines the amount and method of collection of the fee, although the bill does not set any fee limits. The bill does not indicate whether the fees are (1) in addition to the employee's contribution or (2) taken out of the contribution. Presumably the fee is taken out of the contribution, as is usually the case with IRAs.

MOUs Regarding Employee Information and Administrative Cost Sharing

The bill requires the board to enter into memoranda of understanding with the Labor Department and other state agencies regarding:

1. gathering or disseminating information necessary for the operation of the program, subject to confidentiality rules as may be agreed or required by law,

2. sharing of costs incurred due to the gathering and dissemination of this information, and

3. reimbursement of costs for any enforcement activities conducted by the attorney general.


The bill requires the program to establish and maintain an IRA for each program participant either by the program itself or by a third-party entity in the business of establishing and maintaining IRAs. The assets must be held in trust or custodial accounts meeting the federal requirements for IRAs (Internal Revenue Code of 1986, 408 (a) or (c), as amended from time to time). Each participant has the right to choose either a traditional IRA (pre-tax contributions) or a Roth IRA (after-tax contributions). In the absence of a participant's affirmative election, a Roth IRA will be established for the participant.

The bill specifies that interest, investment earnings, and investment losses are allocated to each participant's IRA. A participant's benefit under the program is equal to the balance in such participant's IRA as of any applicable measurement date.

The bill requires the authority to establish processes to prevent a participant's contributions to the IRA program from exceeding the annual maximum deduction amount set in federal tax law (26 USC 219(b)(1)).

State Exempt from Liability

The bill explicitly exempts the state from any liability (1) related to payments to a participant or beneficiary or (2) of the authority. The authority is only liable for benefits with respect to IRAs the authority maintains.


The bill requires the authority board of directors to prepare program informational materials for distribution by qualified employers to plan participants and prospective plan participants. At a minimum the informational materials must include:

1. the benefits and risks associated with making contributions to, or withdrawals from, the program;

2. the program contribution process, including a contribution election form;

3. clear and conspicuous notice regarding the default contribution level;

4. the process for a participant to opt out of the program by electing a contribution level of zero;

5. the process for withdrawing retirement savings, including an explanation of how the tax treatment of withdrawals may differ between a Roth IRA and a traditional IRA available under the program;

6. how a participant may obtain additional information on the program, including investment option information; and

7. other information the board deems fit to provide to participants, potential participants, and qualified employers.

At least quarterly, the board must provide a statement to each participant that includes, at a minimum:

1. the participant's IRA account balance, including the value of the participant's investment in each selected investment option;

2. the investment options available to each participant and the process for selecting investment options for his or her contributions as allowed in state law or by the authority;

3. the fees charged to each participant's IRA and a description of the services provided for the fees; and

4. if the board chooses, an estimate of the income the account is projected to generate for a participant's retirement based on reasonable assumptions.

Annual Fees Notice

At least annually, the board must provide each participant with information on program fees and on the various investment options that may be available. This may be provided in the form of a prospectus or similar document.

Electronic Dissemination of Notices

The board may adopt policies and procedures, provided public notice of the new procedures is met, for the electronic dissemination of any required notices or information to participants, potential participants, and qualified employers.


The bill requires the authority to act:

1. with the care, skill, prudence and diligence under the circumstances that a prudent person familiar with such matters would use in a similar situation;

2. solely in the interests of program participants and beneficiaries;

3. for the exclusive purposes of providing benefits to participants and beneficiaries and defraying reasonable expenses of administering the program; and

4. in accordance with the bill's provisions and any applicable statutes.

To the extent reasonable, the board must require any agents the authority engages or appoints to abide by the same standards.


Not later than July 1, 2017, and each subsequent year, each qualified employer must provide each of its covered employees with the informational materials the authority is required to prepare.

For any employee of a qualified employer who (1) is hired on or after July 1, 2017 or (2) does not meet the definition of covered employee under the bill, the employer must provide the informational materials to such employee no later than 30 days, or another time period the authority prescribes, after, (a) the date of such employee's hiring or (b) the date the employee meets the definition of a covered employee.

No later than 60 days after providing the informational materials, the qualified employer must automatically enroll each of its covered employees in the program at a contribution rate (1) the employee selects or, (2) at 3% if the employee did not actively select a contribution rate. The contributions will be made under the provisions of the automatic enrollment law that allows an employer to make enrollment contributions to retirement accounts on an employee's behalf without the employee's affirmative decision to make the contribution.

The bill prohibits employers from making contributions to the program. (Employer contributions would make the program fall under the regulatory authority of the federal Employee Retirement Income Security Act of 1974. In general, retirement programs that include private sector employer contributions are regulated under ERISA.)

Employee Opt-Out

Existing law and the bill allow employees to affirmatively opt out of the automatic contribution plan. Under the bill a covered employee may opt out of the program by electing a contribution level of zero.

Delaying Program Start Date

The bill permits the authority to delay the effective date of the program, in whole or in part, and for particular categories of employers, as it deems necessary to implement the bill's provisions and minimize the disruption and burdens that may exist for any qualified employer.

Exempt Employers

A qualified employer that maintains a retirement plan recognized under the federal tax code or approved by the authority is exempt from the bill's requirements to provide the informational material and automatically enroll qualified employees.

If the authority determines that an employer is not continuing to maintain its retirement plan recognized under the federal tax code then the employer is no longer exempt from the bill. An employer will no longer be considered exempt if the authority determines:

1. as of the first day of the previous calendar year, no new participant was eligible to be enrolled in a the retirement plan by the qualified employer, and

2. on and after the first day of the previous calendar year, no contributions were made to the retirement plan by or on behalf of a participant.

The bill does not specify what the authority will consider when determining whether an employer retirement plan, other than one recognized under federal tax law, is exempt from the bill.

Optional Program Participation

An employer that is not otherwise required to participate under the bill may make the program available to its employees subject to rules and procedures the authority establishes. But the bill prevents an employer from requiring an employee to enroll. Individuals may also participate in the program according to procedures the authority establishes and may roll over funds from other retirement accounts.

Transmitting Withheld Funds

The bill requires qualified employers to transmit withheld employee contributions on the earliest day that the amount held can be segregated from the employer's assets but no later than the 15th business day of the month following the month in which the covered employee's contribution amounts are withheld from his or her paycheck.


The bill requires the authority to invest each participant's IRA in (1) an age-appropriate target date fund, (2) a vehicle designed for lifetime income investment to provide participants with a source of retirement income for life or (3) such other investment vehicles as the authority may prescribe.

Target funds, also known as lifecycle funds or age-based funds typically involve a plan where the investment approach becomes less aggressive as the participant gets older, although the bill does not define target date fund.

The bill provides details for the lifetime income investment option and specifies this is only available if the authority determines its features to be feasible and cost effective. If this is determined to be so, the program must include the following features:

1. designate a lifetime income investment option for the program intended to provide participants with a lifetime source of retirement income;

2. provide to each participant, one year in advance of the participant's normal retirement age, a disclosure explaining (a) the rights and features of the lifetime income investment; (b) that at normal retirement age, 50% of the participant's account will be invested in the lifetime income investment; and (c) that the participant may choose to invest a higher percentage of his or her account balance in the lifetime income option;

3. on the date a participant reaches normal retirement age, invest 50% of the account balance, or the higher amount if the participant so chose, in the lifetime income investment;

4. permit each participant to elect a date no earlier than his or her normal retirement age to begin receiving distributions, provided, in the absence of an election, such distributions start no later than 90 days after he or she reaches normal retirement age; and

5. establish procedures so participants may choose to invest a higher percentage of his or her account balance in the lifetime income investment.

Normal retirement age is 65 years old unless the participant chooses an earlier age except that in no case can the age be earlier than specified in the Social Security Act (42 USC 416 (1)(1)). (The federal law is gradually phasing in older retirement ages; currently normal retirement age is 66.)

Fund Distribution

The authority must establish rules and procedures for IRA fund distribution that allow for the same distribution as the IRS code as well as any the program allows.


The bill authorizes the attorney general to investigate any alleged violation of the bill's requirement that the authority act with prudence and solely in the interests of the participants. If the attorney general finds that any board member or any authority agent has violated or is violating that duty the attorney general may bring a civil action in Hartford Superior Court against the board member or agent. The remedies available to a court in any such action are limited to injunctive relief. Nothing in the bill can be construed to create a private right of action.


If a qualified employer fails to remit contributions to the program in the time period specified in the bill, the bill makes this failure a violation of state law regarding an employer's ability to withhold employee wages. By law, 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) .

If a qualified employer fails to enroll a covered employee as required in the bill, 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.


Under the bill, the authority must keep an account of all its activities, receipts, and expenditures and submit a report detailing these items to the authority board, the governor, the Office of Auditors of Public Accounts (“auditors”), and the Labor and Finance, Revenue and Bonding committees by December 31 each year. The report must be in a form the board prescribes and include authority activities for the next fiscal year. Also, the report is subject to the auditors approval.

The bill authorizes the auditors to conduct a full audit of the authority's books and accounts pertaining to activities, receipts, and expenditures, personnel, services or facilities. For the purposes of the audit, the auditors have access to the authority's properties and records and may prescribe methods of accounting and periodic reporting in relation to authority projects.

Furthermore, the bill requires the authority to enter into memoranda of understanding with the state comptroller through which the authority must at a minimum provide, in a form the comptroller prescribes, information on the authority's current revenues and expenses, including the sources or recipients, relevant dates, and the amount and category of each revenue or expense.

12 — STUDY

The bill authorizes the authority to study the feasibility of the state or the authority making a multiple-employer 401(k) plan or other tax-favored retirement savings vehicle available to employers.


The sections make conforming changes by adding the new authority to existing law addressing quasi-publics and (1) the state code of ethics, (2) authority borrowing and bonding power, and (3) liability protection for board members and employees when performing authority duties.


The bill makes conforming changes to state law regarding employers authority to withhold funds from employees' paychecks for automatic deductions for retirement plans.


The bill repeals the law creating the Connecticut Retirement Security Board and its duty to create a public retirement plan. The authority the bill creates replaces the board.


Labor and Public Employees Committee

Joint Favorable Substitute