OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 ↓ (860) 240-0200
AN ACT CREATING THE CONNECTICUT RETIREMENT SECURITY PROGRAM.
LCO No.: 4515
File Copy No.: 303
House Calendar No.: 227
OFA Fiscal Note
State Impact: None, Potential Revenue Impact Beginning in FY 22
Municipal Impact: None
The amendment strikes the underlying bill and its associated fiscal impact. The amendment 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 employees beginning in FY 18.
The amendment 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 amendment 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 therefore 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 amendment, 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 amendment. The estimated start-up cost for the CRSA/CRSP is estimated to be at least $500,000 to $1 million, and a commiserate amount annually thereafter to run the CRSA.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 amendment does not require the state to participate financially in the program.
The provisions of the amendment 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 amendment'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 amendment does not establish reporting requirements or another relationship between the department and participating employers.
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.
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