AN ACT CONCERNING ECONOMIC SECURITY FOR CONNECTICUT FAMILIES.

The bill requires the state Comptroller to establish a tax-qualified defined contribution retirement program to provide retirement investment plans, including 401(k) plans, to (1) self-employed individuals, (2) businesses with 100 or fewer employees, and (3) certain nonprofit organizations. The bill establishes a voluntary program and does not place any requirements or duties on participating employers that would be preempted by ERISA. The underlying employer-sponsored plans (other than plans for self-employed individuals) would still be subject to ERISA, however.

The bill requires the Comptroller to recover from plan assets the expenses her office incurs to initiate, operate, and administer the program. It is likely that the third-party administrator would collect these costs through the administrative fees charged to each plan participant and then reimburse the Comptroller's Office. According to advisory opinions issued by the U. S. Department of Labor, the costs related to establishing, amending, or terminating employee benefit plans are not considered reasonable administrative expenses that may be charged to plan assets. These costs would therefore have to be paid by the employer or plan sponsor and cannot be paid with plan assets.

In general, ERISA does not apply to plans established or maintained by government entities or churches for their employees, or plans that are maintained solely to comply with workers' compensation, unemployment, or disability laws. If, however, the state's existing deferred compensation program was combined with the plans proposed in the bill it would likely affect the current program's ERISA exemption. Moreover, given that the programs involve plans governed by different sections of the Internal Revenue Code, combining them may also affect their tax status.

The Employee Retirement Income Security Act (ERISA) was enacted in 1974 as a federal regulatory scheme for private sector employee benefit plans. It sets forth requirements for benefit plan participation, funding, and vesting of benefits. It also establishes uniform standards for reporting, disclosure, and fiduciary duties to ensure that employee benefit plans are established and maintained in a fair and financially sound matter.

Yea

Nay

(04/15/2009)