Securing Retirement

Future financial planning is important for everyone and especially for LGBTQ+ communities where there may be non-traditional families and unqiue financial arrangements. If you’re a business owner, you may be wondering, “Do I get a retirement plan? Should I create one for my employees? How do I even go about this?” If you are an employee, you may want to know what provisions are being made for you through your work.

Good news! The State of Connecticut has heard your concerns and made it easy to offer employers and employees ways to save for retirement. In fact, it is now mandatory for certain businesses to offer a qualified retirement plan.

Nearly 600,000 working people in Connecticut have no access to workplace-based retirement savings, and that number is growing, according to the office of the State Comptroller. The elimination of pensions more than twenty years ago forced workers into claiming responsibility for their own retirement income. Hardworking, middle class families are financially unequipped with the resources needed for a robust retirement. This will require many to delay retirement for as long as possible to maximize social security benefits and/or double dip with social security and job wages.

Connecticut stepped in to attempt to ease this burden on employees and the economy.  The state mandates that employers in the state who have five or more employees who earn more than $5,000 in a calendar year must participate in an employer-sponsored qualified retirement plan, or they may be penalized. An employer-sponsored retirement plan includes a plan qualified under Internal Revenue Code a 401(k), qualified annuity plan under section 403(a), tax-sheltered annuity plan under section 403(b), Simplified Employee Pension plan under section 408(k), a Simple IRA plan under section 408(p), or governmental deferred compensation plan under section 457(b).

As a business owner, choosing the right qualified retirement plan may be a daunting task, and we recommend speaking to a financial professional for guidance. Here are a few options to consider when seeking advice that will meet your business and employee needs:

MYCTSAVINGS: The Connecticut Legislature passed a law that created MyCTSavings to make it easier for more workers to save for their retirements. The program uses automatic enrollment and savings through payroll deductions to help employees save. Eligible employees can opt out if they don’t want to participate or prefer to save another way. This is the “Do-It-Yourself” option. For more information visit: www.myctsavings.com

401(k): This is a subsection of the IRS code that defines an employer-sponsored, defined-contribution, personal pension (savings) account. This means that an employee may contribute periodically to the plan directly out of their paycheck, and the contribution may be matched by the employer. Some businesses may have tax benefits, fees and/or administrative costs associated with these plans. The benefit of these retirement plans is that they offer financial guidance and administration support.

SIMPLE IRA or Savings Incentive March Plan for Employees: This retirement plan is ideal for small businesses and can be seen as the “gateway” plan to get into retirement planning.  It allows employers and employees to contribute to a Traditional IRA.  These plans usually come with low fees and financial guidance.

Simplified Employee Plan or SEP: This retirement plan is for business owners only.  It can be a great way for business owners to save for their retirement and have favorable tax consequences. These plans may come with financial guidance and should be discussed with a financial professional and/or an accountant.

Whatever business you’re in, now is the time to get that retirement plan started. Let’s not forget the many helpful LGBTQ+ businesses associated with the CT Gay and Lesbian Chamber of Commerce that provide assistance finding the best plan for you. For a list of those businesses please visit: https://ctglc.org/

—Michelle Cutrali

DISCLAIMER: This article is for informational purposes only, and it does not replace professional investment advice, for legal, tax, financial, or any other. It is recommended that you seek such advice from a Financial Advisor who will understand your individual situation.