James Zahansky, AWMA®
Principal/Managing Partner, Investment Advisor & Chief Goals Strategist
Beginning this month, Connecticut employers with five or more employees will be required to register with the MyCTSavings Program, or certify that they are exempt from the program. If you’re a Connecticut business owner, here’s what this means for you, your business, your employees, and your bottom line.
What the MyCTSavings Program Is and Why It Was Established
The MyCTSavings program is a retirement savings plan sponsored by the State of Connecticut’s Retirement Security Authority. It was established to provide access to an employer-sponsored retirement savings plan for more Connecticut employees, something that more than 600,000 private-sector employees in Connecticut currently do not have, according to a report by the state Comptroller’s office.
Legislation designed to meet that need through a program such as this was passed in 2016, but the program itself wasn’t officially launched until this year. It facilitates automatic payroll contributions to a Roth Individual Retirement Account (IRA) for participating employees.
MyCT Savings Program Requirements and Registration Deadlines for Connecticut Employers
All Connecticut employers with five employees or more (who each have been paid $5,000 or more in a calendar year) are required to either register to participate in the program or certify that they are exempt from it because they already offer their employees a retirement plan. This can be done online at myctsavings.com. (Employers should receive an access code in the mail; you’ll need that along with your Employer Identification Number (EIN) to register or certify your exemption.)
The deadline to do this is dependent on the number of people your business employs. Employers with 100 or more employees must register or certify by the end of this month, June 30; those with 26 to 99 employees must do so by October 31; and those with 5 to 25 employees must do so by March 30, 2023.
The Basics, The Pros and The Cons of The MyCTSavings Program for Employers
If you don’t already offer your employees a retirement plan, you’ll have to register for MyCTSavings. Once registered, you’ll need to upload payroll and employee information and submit your employees’ savings contribution levels, and the initial setup will be complete.
Moving forward, you’ll need to continue to submit payroll details each pay period and keep your employees’ payroll contributions and staff list up to date. What you won’t have to do is enroll your employees (that will happen automatically), or handle any of the administration of the plan (that will all be handled by the MyCTSavings program).
The pros to the program for employers is that it offers a convenient way to help employees reach their financial goals – and not only does that allow you to help your valued employees to live well, it can also help you to attract and retain those employees, which can serve to strengthen your business.
There’s minimal administrative work involved for employers, and it integrates easily with payroll systems. It’s affordable, since no fees are charged to employers given that the plan is entirely funded by employees. The plan also assigns no fiduciary risk to employers and grants employers with immunity with regard to investment returns, plan design and retirement income paid to enrolled employees.
Although there is a drawback, it’s avoidable – there will be a penalty for qualified employers who fail to enroll qualified employees in this plan. So make sure you do, if you don’t already offer a qualified plan of your own.
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The Basics, The Pros and The Cons of The MyCTSavings Program for Employees
Employees who work for participating employers, are age 19 or older and employed with a Connecticut employer for at least 120 days will be automatically enrolled in the program once the employer signs up. Employees will then have 30 days to choose their savings rate and investment elections, or they can choose to opt out.
If they do neither of those things by the end of the 30-day period, they will be automatically enrolled with the default contribution of 3% of their gross income and the default investment portfolio. Employees can still choose to customize their plan selections or opt out of the program at any time after that 30-day period. Enrolled employees will also have the ability to make changes to their account online at any time. And, if they change employers in the future, they can choose to continue making contributions to the account, or roll it over to another account.
So the pros for employees are many – access to an easy to enroll, convenient to manage retirement savings plan that they didn’t have before. And, they can opt out at any time. The only drawback is that there is a $6,000-per-year cap on contributions ($7,000 for those eligible for catch-up contributions) for IRA accounts – much less than the $20,500 cap for 401(k) plans.
Navigating the MyCTSavings Program as Part of An Overall Business Financial Strategy
The MyCTSavings Program can represent a whole new aspect of employee benefits for participating employers – one that comes with both new responsibilities for business owners as well as new opportunities for both them and their employees. It’s a great time to consider what else you can do to position your business, and yourself as owner, for growth and financial success right now and over the long term,
If you’d like to explore how a comprehensive financial plan and partner could benefit you and your business, contact our team at Weiss, Hale & Zahansky Strategic Wealth Advisors. We’re passionate about working with business owners to help them, their families and their team to ultimately Live Well through our strategic Plan Well, Invest Well, Live Well™ process. Contact us at (860) 928-2341 or firstname.lastname@example.org.
Authored by Principal/Managing Partner James Zahansky, AWMA®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860-928-2341. http://www.whzwealth.com.