The retirement savings crisis in America is no secret: According to PwC's Retirement in America, one in four Americans has yet to save a single dollar for their retirement years. Moreover, approximately 30 million retirees are projected to live in poverty or close to it by 2035.
Connecticut is no exception. According to the MyCTSavings website, more than 600,000 private-sector employees have no employer-sponsored retirement savings plan in Connecticut.
Fortunately, Connecticut has a solution: The MyCTSavings Retirement Program (MyCTSavings), a convenient and efficient retirement program that benefits workers in Connecticut.
In this article, we'll explain everything you need to know about MyCTSavings, including how it works, who can use it, and answer questions you didn’t know you had!
The Connecticut Retirement Savings Program, also known as MyCTSavings, is a voluntary retirement savings program for employees and other individuals working in Connecticut. Contributions are made through payroll deductions, and the money grows tax-free until it's withdrawn.
MyCTSavings is overseen by the Connecticut Retirement Security Authority and administered by private-sector partners. The program allows workers to contribute up to $6,000 per year from their paychecks into a Roth IRA, or $7,000 if the employee is age 50 or over.
MyCTSavings an automatic enrollment program that uses a Roth IRA, which means that contributions are made with after-tax dollars. Therefore, employees won't have to pay income tax on any money they withdraw from their account during retirement. This money will grow tax-free, too!
Once an eligible employee is hired, employers report employees to the MyCTSavings portal and employees have 30 days to opt-out before being automatically enrolled at the default contribution level of 3%
Businesses that are required to implement the MyCTSavings program have five or more employees paid more than $5,000 in the calendar year. If the company already offers a private retirement plan, the company does not need to register with the program.
Employers are required to automatically enroll their workers in the program if they did not opt out, and to remit employee contributions to their workers’ accounts each time they run payroll.
The idea behind the program is to help people save for retirement. Contributions are made after taxes, so they grow tax-free until they're withdrawn. Employers don’t match or make their own contributions, and are not considered plan sponsors.
If your company has five or more employees and is not yet sponsoring a retirement plan, you have several alternatives to MyCTSavings. You can set up a:
MyCTSavings launched its pilot program in August of 2021 and the full rollout of the program is expected in the first half of this year. It is anticipated that the program will roll out in waves, beginning with larger employers first. Deadlines for each wave have not been determined. Interested individuals are encouraged to check the MyCTSavings website for more information on the program's official launch.
Interested individuals are encouraged to check the MyCTSavings website for more information on the program's official launch.
The MyCTSavings retirement program is open to all Connecticut employees who are at least 19 years old and have been employed for at least 120 days. Seasonal employees are also eligible for enrollment as long as they work for an employer for more than 120 days. Self-enrollment into the program is not available at this time.
As of now, there are no registration deadlines. However, once the program is officially launched, there may be penalties imposed on companies that fail to comply with the mandate. Details on enforcement timing and potential penalties for noncompliance have not been announced.
The MyCTSavings program allows Connecticut employees to save for retirement while enjoying certain tax advantages. However, a better retirement plan may be available to your business, such as a 401(k) or 403(b) plan.
Employers who offer a 401(k) savings plan to employees can attract competitive talent to their firm and improve employee well-being, all while staying in compliance with the MyCTSavings’ mandate. Contributions are made with pre-tax dollars, which lessens an employee’s taxable income for the year. A 401(k) also has higher contribution limits than other plans like MyCTSavings.
Vestwell is a digital retirement plan platform that makes it easier for you to offer and administer a company-sponsored 401(k) or 403(b). By combining technology with best-in-class retirement plans, Vestwell has created programs that are more accessible, more efficient, and less expensive.
Retiring can be an intimidating prospect, especially if one doesn't have much saved up. But thanks to the MyCTSavings retirement program, Connecticut residents now have another option for securing their financial future in retirement.
However, there is a chance that you may still be interested in other retirement programs such as a 401(k). If you are interested in setting up a 401(k) account for your business, you can contact Vestwell to help determine if you are eligible to receive up to $16,500 in tax credits, which can help cancel out administration costs.