cew
03-21-2008, 08:51 AM
SB 652 is a bill to establish a Connecticut 401-k plan for small businesses. The State of Connecticut believes it can administer 401(k) plans to small businesses (100 employees or less) by cutting costs and making these plans affordable. Although it may sound like a good idea initially, it is not for many reasons, one being the complexity of rules that govern a 401(k) Plan, and the stiff penalties for non-compliance with these rules. In addition, many complex tests must be performed on an annual basis in order to assure compliance with these rules.
There are risks associated with non-compliance of federal rules: the loss of expected tax deductions from corporations and/or individuals if any mistakes are made; penalties if mistakes are made; investment loss risks due to administrative errors from miscoding of contributions from hundreds, and potentially thousands, of payroll data input mechanisms; and a substantive risk if the participants in the plan are not adequately notified and educated.
The majority of pension administration firms employ people with specific designations such as Qualified Pension Administrator, Qualified 401(k) Administrator, and actuarial designations because of the above-mentioned regulations and compliance issues. These designations are only given after rigorous testing. After receiving a designation, employees must keep current on ERISA-the federal law that governs qualified plans-rules and regulations by attending conferences and seminars around the country, reading, and attending web-casts at work.
It doesn’t appear that the State of Connecticut has taken any of this into consideration. Who would you want to administer your 401(k) Plan? Professionals with in-depth experience, or a government who short-sightedly sees this as a great opportunity but has no experience?
A state run 401k Plan will cause loss of jobs in the pension profession and loss of tax revenue from these firms when they move to employer-friendly states like Pennsylvania and New Jersey.
There are risks associated with non-compliance of federal rules: the loss of expected tax deductions from corporations and/or individuals if any mistakes are made; penalties if mistakes are made; investment loss risks due to administrative errors from miscoding of contributions from hundreds, and potentially thousands, of payroll data input mechanisms; and a substantive risk if the participants in the plan are not adequately notified and educated.
The majority of pension administration firms employ people with specific designations such as Qualified Pension Administrator, Qualified 401(k) Administrator, and actuarial designations because of the above-mentioned regulations and compliance issues. These designations are only given after rigorous testing. After receiving a designation, employees must keep current on ERISA-the federal law that governs qualified plans-rules and regulations by attending conferences and seminars around the country, reading, and attending web-casts at work.
It doesn’t appear that the State of Connecticut has taken any of this into consideration. Who would you want to administer your 401(k) Plan? Professionals with in-depth experience, or a government who short-sightedly sees this as a great opportunity but has no experience?
A state run 401k Plan will cause loss of jobs in the pension profession and loss of tax revenue from these firms when they move to employer-friendly states like Pennsylvania and New Jersey.