Is MyCTSavings good for employees?

I think MyCTSavings is better than saving nothing, but I do not think it is a great long term retirement solution for most employees. It solves one real problem, people need an easy way to start. Payroll deduction helps. Automatic enrollment after 30 days helps. A default 5% savings rate helps. For workers who would otherwise do nothing, I would rather see money going into MyCTSavings than sitting in checking. The program also gives employees a simple on-ramp when they do not know where to open an account or how to set up automatic contributions on their own.

But I would not confuse “better than nothing” with “good enough.” MyCTSavings is a Roth IRA, not a 401(k). That matters. Employees do not get an employer match. Employees do not get the much higher 401(k) contribution limits. Employees pay the fees. Employees also do not get ERISA protections because this is not an employer retirement plan under the normal 401(k) framework. I think those are big drawbacks, not small ones. The difference is not just technical. It affects how much people can save, what tax treatment they can choose, and whether employer dollars are available.

The program also comes with a cost structure that is hard to ignore. The current program description shows a $26 annual account fee, charged quarterly at $6.50. On top of that, the auto-enrollment notice shows an asset-based fee of about 0.23%. There are also extra charges, $50 for a rollover out, $10 a year for paper statements, and $5 for a paper check withdrawal. For a small balance saver, that fixed $26 annual fee is a high hurdle compared with many off the shelf IRAs that have no annual account fee at all. A worker who starts with modest payroll deductions can feel that fixed fee much more than someone with a larger existing balance.

I also do not love that the program is Roth only. Roth can be great for a lot of people, especially younger workers and people in lower tax brackets. But not everyone is in that camp. Some employees really need a pre-tax option, especially if they are trying to lower current taxable income. MyCTSavings does not offer that choice. You either use a Roth IRA through the program or you opt out and do something else on your own. That all-or-nothing structure matters for workers balancing student loans, child care, or high current tax bills.

Employees should also understand what MyCTSavings does not include. There is no planning. There are no meetings with an advisor as part of the program, not in a group and not one on one. There is no employer contribution in the cited materials. There is no ability for the employer to pay the account fees for the employee. If you want guidance on whether Roth makes sense, how much to save, or how this fits with a spouse’s plan, HSA, debt payoff, or emergency fund, MyCTSavings is not built for that. The program is mainly a payroll deduction system tied to an IRA, not a full retirement benefit.

How the rules work

MyCTSavings starts with automatic enrollment if your employer is in the program and you do not opt out. The notice period is 30 days. If you do nothing, the default contribution rate is 5% of gross pay. Each January, the program increases that rate by 1 percentage point until you reach 10%, unless you opt out of the automatic increase. I like automatic features in general because inertia is real. A lot of people need a push to get started. Automatic escalation can be helpful because a 5% savings rate is often not enough for someone who is starting late or trying to build a meaningful retirement balance.

Employees can change the contribution rate at any time. The minimum ongoing rate is 1%. If you want out, you set the rate to 0%. The program says the maximum election can be as high as 100% of available compensation up to the federal annual Roth IRA contribution limit. That payroll election rule sounds simple, but employees still have to follow the actual IRS Roth IRA rules. The payroll system does not protect you from every tax issue. Workers with more than one IRA contribution source should be especially careful because contributions made outside the payroll program still count toward the same annual cap.

For 2025, the IRA contribution limit is $7,000, or $8,000 if you are 50 or older because of the $1,000 catch-up. For 2026, the limit rises to $7,500, or $8,600 if you are 50 or older because the catch-up increases to $1,100 under SECURE 2.0 indexing. Those are IRA limits, not workplace plan limits. That is one of the biggest weaknesses in MyCTSavings. A worker in a 401(k) can defer $23,500 in 2025 and $24,500 in 2026, plus catch-up contributions of $7,500 in 2025 and $8,000 in 2026 if age 50 or older. Workers age 60 through 63 can do even more in many employer plans, $11,250 of catch-up in 2025 and 2026. MyCTSavings is nowhere close to that. An employee trying to make up for years of low savings will hit the IRA ceiling much faster than the 401(k) ceiling.

Income limits matter too, because MyCTSavings uses a Roth IRA. For 2025, Roth IRA phase-outs start at $150,000 and end at $165,000 for single and head of household filers. For married filing jointly, the 2025 phase-out is $236,000 to $246,000. For married filing separately, the range is $0 to $10,000. For 2026, the ranges move up to $153,000 to $168,000 for single and head of household, and $242,000 to $252,000 for married filing jointly or qualifying widow(er). Married filing separately stays at $0 to $10,000. If your income is too high, you may not be eligible to make the Roth IRA contribution you elected through payroll. I think that is a real problem because the program’s payroll election process is described without regard to Roth income limits. The employee has to know the tax rules. Workers with variable bonuses, overtime, or a spouse’s income can easily misjudge where they will land by year-end.

The investment default is also worth understanding. Contributions go first to the Cash Preservation Portfolio. Then, after about 60 days from the applicable contribution date, the money is swept into an age-based Target Retirement Date Portfolio unless the employee chooses something else. That is a reasonable default structure. Still, there is no advice attached to it. Nobody is sitting down with the employee to explain risk, retirement age assumptions, outside accounts, or whether a Roth IRA is even the best first bucket. The temporary stop in the cash portfolio also means money may not be fully invested in the target-date option right away, which is not a crisis but is still a design feature employees should know about.

Another practical rule is that IRA eligibility depends on having taxable compensation. For most workers using payroll deduction, that requirement will be met. Still, the account follows IRA law, not a custom set of rules written just for this program. Employees should think of MyCTSavings as a delivery system for IRA contributions, not as a separate category of retirement account with its own tax code. That distinction matters when you review annual limits, excess contribution rules, correction procedures, and withdrawal treatment.

My practical take

I think MyCTSavings works best for one group, employees who need training wheels. If you have no retirement account, no savings habit, and no intention of opening an IRA yourself, then payroll deduction into MyCTSavings is useful. It creates motion. It gives you a Roth IRA in your own name. It is portable because it is an IRA, and the program allows rollovers out, although there is a $50 rollover-out fee. For a worker starting from zero, that may be enough reason to stay in. Portability is a real plus for employees who change jobs often, because the account does not stay tied to one employer the way some workers assume a workplace plan does.

But the downsides are real. First, the fees are high compared with many retail IRAs. A $26 annual fee plus about 0.23% may not sound like much on a large balance, but on a $1,000 account that is roughly 2.83% in the first year before counting market movement. On a $2,500 account it is about 1.27%. Many off the shelf IRA providers charge no annual account fee and give access to very low cost index funds or ETFs. Second, every fee here is paid by the employee. The cited materials do not show employer contributions, and they do not show an option for the employer to cover the employee’s fees. Third, there is no match. Missing a 3% or 4% employer match in a real 401(k) is a big deal over time. A match is an immediate return on contributions, and MyCTSavings simply does not provide that feature.

Maria is a good example. She is 29, earns $48,000, and works for a small Connecticut employer that does not offer a 401(k). She was auto-enrolled at 5% and did nothing, which was probably a good move because she had never opened an IRA on her own. After a few months, though, we would want her to check whether the fee structure makes sense for her and whether she qualifies for the Saver’s Credit, which for 2025 can apply up to AGI of $39,500 for single filers, $59,250 for head of household, and $79,000 for married filing jointly, with the credit worth 50%, 20%, or 10% of eligible contributions up to $1,000, or $2,000 if filing jointly. She should also compare MyCTSavings with a low-cost Roth IRA provider, because once the savings habit exists, the next question is whether the account itself remains the best place to keep contributing.

I also think employees need to be careful about access and flexibility. Yes, Roth IRAs have withdrawal rules that are generally more flexible than many employer plans, especially for contributions. But the program materials still warn that taxes or penalties may apply depending on timing and purpose. The account is not guaranteed, not FDIC-insured, and principal can be lost. On top of that, because this is an IRA and not a 401(k), you do not have the same plan-level framework or ERISA protections that workers usually think of with employer plans. If you later move into a company 401(k), you also should not assume every rollover path you want will be available. In particular, I would not count on a simple Roth IRA to 401(k) rollover option. In many cases, that is not how the money flows, and employees can get confused on that point. Workers should ask the receiving plan what it accepts before making assumptions about moving the balance.

My recommendation is pretty simple. If MyCTSavings gets you started, use it as a starter tool, not as the final answer. Stay in if the alternative is doing nothing. Contribute enough to build the habit. If your income fits, look at the Saver’s Credit. Then compare the account against a regular Roth IRA at a low cost provider where you may avoid the $26 annual fee, get broader investment choices, and have more control. If your employer later offers a 401(k) or SIMPLE IRA, review that right away because the contribution limits are much higher, 401(k) limits are $23,500 in 2025 and $24,500 in 2026, and employer contributions can change the math fast. Before your next automatic increase in January, check your current percentage, your 2025 or 2026 Roth IRA limit, and whether your income puts you near the phase-out range. Also check whether you are contributing to any other IRA for the same tax year, because the IRS looks at your total IRA contributions, not just what comes through one payroll program.