The MyCTSavings Program is Here – Bridging the Savings Gap in Connecticut.
The MyCTSavings program is a state-initiated retirement savings program. And it’s spearheaded by Connecticut Comptroller, Sean Scanlon.
The program offers the opportunity for those who work in the state of Connecticut to start putting money aside for retirement. This is to help close the gap between the estimated 600,000 residents who currently have no savings plan.
The MyCTSavings program is compliant with Public Act 16-29. The Connecticut Retirement Security Authority which was enacted in 2016.
As a Connecticut employer, there’s a lot you need to know about MyCTSavings. We’ve mapped it all out for you and your employees below!
What does the MyCTSavings program look like for Connecticut Residents?
The MyCTSavings program is a Roth IRA. It deducts directly from the employee's paycheck post-tax. There is a deduction code for the program that employers add to their payroll process.
Because the money an employee sends in has already been taxed, they will not have to pay taxes on this money when they withdraw it later on.
Other stipulations of the MyCTSavings program:
Employees must be 19 years of age or older.
Employees have to have worked for at least 120 days.
Employers are not required (and do not have the option) to match investments.
What do you need to know about MyCTSavings as an employer?
This program is cost-free for all enrolled employers. And applies to all non-profit companies as well.
To offer the MyCTSavings plan to your employees, you have to enroll. To do so you must meet the following qualifications:
You have over 5 employees who have been paid a minimum of $5,000 in the calendar year.
You DO NOT currently offer a retirement savings plan.
If you’re an employer that meets the requirements for the program, you should have already received a physical letter or email detailing information about MyCTSavings.
This letter serves to inform employers who are not exempt from the program. And to provide an access code to call in and set up their plan. When you call you’ll also need your EIN number and basic information about your company.
If your company is part of the wave 3 enrollment you’ve got until April 1, 2023, to enroll. Wave 3 includes companies with 5-24 employees.
As of now, there are no penalties if you miss this date. But you’re encouraged to enroll as soon as possible because penalties may be set in the future.
If you’re an employer with additional questions about the MyCTSavings program, or if you’re not sure whether you’re exempt, you can call 1-833-811-7435 to speak with an account representative.
For help with the onboarding process, check out this great video.
I am a multi-state employer, what does the MyCTSavings program mean for me?
As a multi-state employer, you’re required to offer this program to employees who perform job duties and are paid through a CT employer address. But only if you don’t currently offer another retirement savings plan.
MyCTSavings is working closely with other states to create a multi-state program. But that’s not yet up and running.
What do your employees need to know about the MyCTSavings plan?
The program is starting in April 2023 and is set automatically at a 3% investment rate.
If your company is participating in the MyCTSavings program, as an employer you’re required to automatically enroll your employees in the plan.
Employees who work in Connecticut but aren’t CT residents also qualify for the MyCTSavings plan as long as they work at a participating company.
Paycheck deductions will start immediately. Be sure to inform your employees of this. They have a 30-day grace period to opt out of the program, penalty-free. Opting out now doesn’t prevent an employee from participating in the MyCTSaving program again in the future.
Once enrolled in the plan, employees can set their investment rate anywhere from 1-10%. Yearly investments cap at $6,500 if you’re under the age of 50 and $7,500 a year if you’re over the age of 50.
Additionally, employees will have account access and be able to choose how they want to invest and diversify their savings through the MyCTSavings online portal. The portal gives workers the freedom to change their portfolios through multiple offered options.
If no portfolio option is selected after 60 days of participation, funds will automatically be invested into a Targeted Retirement Portfolio.
The creators of the MyCTsavings program have worked to make it as easy to use as possible. They’ve partnered with Vestwell State Savings, LLC, dba Sumday Administration to further help employees manage their investments to meet their needs.
Employees can find out more about their investment options through the MyCTSavings plan here.
Potential drawbacks of the MyCTSavings program
The enrollment and registration process does take some time. You’re also required to enroll all employees even if they intend to opt out of the program.
Once your company is enrolled you’ll have 60 days to input all employee information to get them set up in the MyCTSavings program. From there, employees who want to opt out will have the option to do so.
MyCTsavings works with many different payroll systems to help the process flow as seamlessly as possible. But it’s the employer’s responsibility to set up the deduction codes. In other words, making sure the funds are being deducted correctly is up to you.
Once those deductions are made, you’re responsible for making sure your payroll system is remitting that payment back to the MyCTSavings program.
If your payroll system doesn’t work with MyCTSavings, you’re responsible for remitting the payment each pay period. There may be penalties associated with not sending payment in a timely fashion. So a lot of responsibility for this program does fall to the employer.
The MyCTSavings plan is designed to be employee friendly and encourage retirement savings. But like any investment program, there are always risks and fees involved.
Like a typical Roth IRA, employees may be penalized for withdrawing from the fund in its first 5 years of life if they’re under the age of 59 ½. Additionally, the max contribution may seem low to certain investors.
There is also a small percentage charge of 0.26% of each investment option. This is in addition to a $26 yearly fee that is deducted from the account at a $6.50 per quarter rate for the program administration fee.
The MyCTSavings program has taken on the task of providing options and education for future financial planning in ways that have not readily been available in the past.
We know that the moves Connecticut is making to encourage retirement savings will benefit the state’s population in the long run. Even if the brand-new program seems daunting and unfamiliar right now.
The program currently has an 83% retention rate for those who have been enrolled. Administrators hope to see that rate increase as it becomes an option for more workers in the future.
When it comes down to it, the MyCTSavings program is a great option to bridge the widening savings gap for those who have not been able to find suitable options on their own.