OLR Bill Analysis

sHB 5591 (as amended by House "A," "B," "C" and "D")*



This bill creates the Connecticut Retirement Security Authority (“authority”) to establish a program for Roth 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 age 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 the 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 at least 3% but not more than 6% 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 program costs.

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

Under the bill, the individual Roth IRAs (i.e., after tax contributions only) 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 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. 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 are 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 on, 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 program participants. It also authorizes the attorney general to investigate violations of this requirement and to seek injunctive relief regarding violations.

The bill bans the authority's board members, employees, and contractors from making or soliciting contributions for campaigns for state elective office in Connecticut.

*House Amendment “A” makes a number of changes to the underlying bill including:

1. removing the option of a traditional IRA (pre-tax contributions) under the program,

2. changing the default automatic contribution by including a limit of not more than 6% of an employee's pay (the underlying bill provided the contribution would be at least 3% but did not specify a limit),

3. requiring that contributions for a tipped employee must be a percentage of the employee's pay and not a set dollar amount,

4. requiring the authority to create a secure website with information on the program for qualified employers and vendors,

5. allowing an employer to use a vendor from the website in lieu of the bill's IRA program,

6. adding qualifications for specific appointees to the authority board of directors,

7. removing a fine for violating the bill's ban on financial conflicts of interest for board members who have a financial interest in an entity contracting with the authority,

8. requiring the board to establish procedures for participants and employees to submit complaints and grievances to the board,

9. requiring the board to establish procedures to make modifications that keep the program consistent with federal tax law and regulations and to prevent the plan from coming under the authority of the Employee Retirement Income Security Act (ERISA) of 1974,

10. specifying that employers are not responsible for collecting contributions from employees,

11. requiring the authority to study whether program participants and potential participants have interest in a traditional IRA option, and

12. making a number of minor substantive and technical changes.

*House Amendment “B” adds the ban on political contributions by board members, employees, and contractors.

*House Amendment “C” modifies the ban to exclude the comptroller and treasurer, who are board members, and added the severability provision.

*House Amendment “D” extends the contribution ban to cover party committees.

EFFECTIVE DATE: Upon passage for the provisions creating the authority and its board, requiring the authority to establish procedures, the IRA program, and the ban on political contributions, and July 1, 2016 for the provisions conforming the authority with existing laws on quasi-publics and payroll deductions.


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 (fixed dollar) amount as the authority determines, but not more than 6%; (c) for tipped employees, the contributions must be a percentage of the employee's pay and not a fixed dollar amount;

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; and

3. “vendor" means (a) a regulated investment or insurance company conducting business in the state or (b) a company conducting business in the state to (i) provide payroll or recordkeeping services and (ii) offer retirement plans or payroll deposit IRA arrangements using products of regulated investment companies, but does not include individual registered representatives, brokers, financial planners, or agents.


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, who serve four-year terms. The state treasurer and state comptroller each serve as ex officio voting members. The bill specifies the other appointing authorities and the qualifications of those they appoint as follows, the:

1. House speaker appoints an individual with a favorable reputation for skill, knowledge, and experience in the interests of the aging population;

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

3. House minority leader appoints an individual with a favorable reputation for skill, knowledge, and experience in retirement investment products,

4. Senate president pro tempore appoints an individual with a favorable reputation for skill, knowledge, and experience in the interests of employees in retirement savings,

5. Senate majority leader appoints an individual with a favorable reputation for skill, knowledge, and experience in plan design,

6. Senate minority leader appoints an individual with a favorable reputation for skill, knowledge, and experience in the interests of retirement plan brokers,

7. governor appoints an individual with a favorable reputation for skill, knowledge, and experience in matters regarding ERISA or the IRS code.

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 employees and 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 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, (1) 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 or (2) procure an equivalent insurance product for the same purpose. 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.

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 that such solicitation must be at least every 10 years for any firm that contracts to provide custodial, recordkeeping, or other services for the provision of an IRA;

5. making modifications that keep the program consistent with federal tax law and regulations and preventing the plan from coming under ERISA's authority;

6. establishing an administrative complaint and grievance process for participants and employees that includes an appeals process where the board hears and address the complaints and appeals, and

7. 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.

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 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 usual with IRAs.

Under the bill, no employer will be required to fund or be responsible for collecting the fees from participants.

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 to 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 a Roth 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).

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)).

Unclaimed Funds

Any unclaimed funds in a participant's IRA following three years of inactivity will be treated as unclaimed funds under existing state law (CGS 3-57a).

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 material for distribution by qualified employers to plan participants and prospective plan participants. At a minimum these 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 the tax treatment of withdrawals;

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

7. a description of relevant state and federal regulations, including those addressing contribution limits, and

8. 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 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 January 1, 2018, and each subsequent year, each qualified employer must provide each of its covered employees with the informational material the authority is required to prepare.

For any employee of a qualified employer who (1) is hired on or after January 1, 2018 or (2) does not meet the definition of covered employee under the bill, the employer must provide the informational material 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 material, the qualified employer must automatically enroll each of its covered employees in the program at a contribution rate (1) the employee selects or, (2) of at least 3% but not more than 6% 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 ERISA's regulatory authority. 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.

The board must provide the Labor Committee with notice of any planned delay in the program no later than seven days after the decision to delay. The notice must include the purpose of the delay and the new effective date.

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.

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.

The bill requires the authority to provide small employers with information regarding tax credits available for businesses that start employee retirement programs.

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 the case, the program must include the following features:

1. designate a lifetime income investment option, with spousal rights, 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 their account balance in the lifetime income investment.

Fund Distribution

The authority must establish rules and procedures for Roth IRA fund distribution that allow for the same distribution as the IRS code. Normal retirement age is 59 years for Roth IRAs under federal tax law (26 USC 408A).

Right to Withdraw Funds

The board must inform participants about their rights to withdraw funds from the program in accordance with the IRS code. For participants who elect to withdraw their assets before their normal retirement age (59 ), the authority must notify them of any tax penalties associated with the withdrawal and the effect of the withdrawal on the person's retirement income.


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 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, 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 the bill requires, 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.


Under the bill, the authority must keep an account of 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. The report is subject to the auditor's 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 in 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.


The bill requires the authority to study whether program participants and potential participants have interest in a traditional IRA option, including the number of participants who would prefer a tax-deferred plan. The authority must submit the report by January 1, 2019 to the Labor and Public Employees Committee.

It also 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 bill requires the authority to establish and maintain a secure Internet website to (1) provide qualified employers with information on employer-sponsored retirement plans and payroll deduction IRAs and (2) assist qualified employers in identifying vendors for retirement arrangements that the employers may implement in lieu of participation in the program. The website address must be included in any posting on the website and in any material offered to the public regarding the program.

Before implementing the website, and at least annually each following year, the authority must provide notice to vendors:

1. that the website is active,

2. that such vendors may register for inclusion on the website, and

3. regarding the process for inclusion on the website.

The board must also establish an appeals process for vendors that are denied registration or removed from the website.

The bill requires each vendor seeking to register for the website to provide:

1. a statement of the vendor's experience providing employer-sponsored retirement plans and payroll deduction IRAs in this state and in other states, if applicable;

2. a description of the vendor's types of retirement investment products; and

3. a disclosure of all expenses paid directly or indirectly by retirement plan participants, including, but not limited to, penalties for early withdrawals, declining or fixed withdrawal charges, surrender or deposit charges, management fees and annual fees.

The bill states that the cost of establishing and maintaining the registration system and the website is to be borne solely and equally by registered vendors, based upon the total number of vendors.

The board may remove a vendor from the website if the vendor: (1) submits materially inaccurate information to the board, (2) does not remit assessed fees within 60 days from the assessment, or (3) fails to submit to the board notice of any material change to the vendor's registered investment products.

Any vendor found to have submitted inaccurate information to the board must be given 60 calendar days to correct the information.


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.


The bill bans authority board members (except the comptroller or state treasurer), or any executive director, assistant executive director or authorized officer the board appoints, or an authority contractor or principal of a contractor, from making political contributions to, or knowingly soliciting contributions from the board's or the executive director's or assistant executive director's employees.

The ban applies to contributions or solicitations for the following:

1. an exploratory committee or candidate committee established by a candidate for nomination or election to the office of governor, any of the state constitutional officers, or state senator or state representative,

2. a political committee authorized to make contributions or expenditures to or for the benefit of such candidates, or

3. a party committee.

The bill specifies that its provisions are severable in the event any particular provision is held invalid or unconstitutional.


Labor and Public Employees Committee

Joint Favorable Substitute