OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 ↓ (860) 240-0200
AN ACT CREATING THE CONNECTICUT RETIREMENT SECURITY PROGRAM.
As Amended by House "A" (LCO 4515), House "B" (LCO 4827), House "C" (LCO 4868), House "D" (LCO 4878)
House Calendar No.: 227
OFA Fiscal Note
State Impact: None; Potential Minimal Revenue Loss Beginning in FY 22
Municipal Impact: None
The bill establishes the Connecticut Retirement Security Authority (CRSA), a quasi-public state agency governed by a board of directors, which may be supported from administrative fees charged to participating members. The authority is tasked with establishing and implementing the Connecticut Retirement Security Program (CRSP), for participation by eligible employers beginning in FY 18.
The bill specifies that the retirement accounts established under the CRSP be a Roth IRA, which offers tax-advantaged status under federal and state income tax law. There is no revenue impact through FY 22, with a Roth IRA plan design.1
The bill is not anticipated to result in a cost to the state in general from the CRSA/CRSP as (1) the authority is not considered a state agency and its employees are not considered state employees, (2) the state is not liable for benefits payable to account holders, (3) the state and municipalities are not considered qualified employers and therefore not subject to the participation requirements of the bill, and (4) any funds borrowed by the authority are to be borrowed in the name of the authority and payable from revenues of the authority. The source of working capital funds and other necessary start-up costs are not specified in the bill. The estimated start-up cost for the CRSA/CRSP is at $500,000 to $1 million and a commensurate amount annually thereafter.2 At a 3% contribution rate, it is anticipated the CRSA/CRSP may be financially self-sustaining three to four years after the program starts. Therefore, any start-up capital may be repaid within five to eight years after the program is implemented.3 There may be cost to the state to the extent that the state provides the start-up funds for the program. However, the bill does not require the state to participate financially in the program.
The provisions of the bill relating to the State Treasurer, Attorney General, State Comptroller and Auditors of Public Accounts do not result in a fiscal impact to those state agencies as the bill's provisions are within the agencies' scope of duties. There is not anticipated to be a cost to the Department of Labor (DOL) as the bill does not establish reporting requirements or any other relationship between DOL and participating employers.
House “A” eliminates the original bill and its associated fiscal impact and results in the impact described above.
House “B” prohibits members of the CRSA board of directors, any officer appointed by the board, the executive director or assistant director, or any vendor from soliciting contributions from or making contributions to various political committees for various political candidates. House “B” does not result in a fiscal impact.
House “C” eliminates House “B” and prohibits certain members of the CRSA board of directors from soliciting contributions from or making contributions to various political committees for various political candidates. These prohibitions do not result in a fiscal impact. In addition, House “C” includes a severability clause which is not anticipated to result in a fiscal impact.
House “D” eliminates House “C” and prohibits certain members of the CRSA board of directors from soliciting contributions from or making contributions to various political committees, including party committees, for various political candidates. These prohibitions do not result in a fiscal impact. In addition, House “D” includes a severability clause which is not anticipated to result in a fiscal impact.
The Out Years
The fiscal impact identified above will continue into the future subject to inflation. There is a potential minimal revenue loss beginning in FY 22 to the extent that contributions to Roth IRA accounts are withdrawn five years or later from the date the account is opened.
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.
2 The estimate assumes the authority is physically within an existing state agency. To the extent the authority procures separate office space there will be an additional cost. (Connecticut Retirement Security Board: Market Feasibility Study, January 1, 2016)
3 Ibid., 1, p. 37