Quick Summary
MyCTSavings is not a retirement plan in the way most business owners think. It is a Roth IRA with a payroll deduction attached, and as IRAs go, it is an expensive one: about 0.23% a year plus a $26 annual account fee, all paid by your employees. A 401(k) gives your team higher contribution limits, a pre-tax option, employer contributions, ERISA protections, and, with the right advisor, real education and planning help. Federal tax credits can offset most or all of an eligible small employer's plan costs in the first three years. The old reasons to avoid a 401(k), too expensive, too complicated, and too much fiduciary risk, do not hold up today, thanks to fast setup, outsourced 3(16) and 3(38) fiduciary services, and local advisors who can handle the payroll connection for you.
I talk with a lot of Connecticut business owners who signed up for MyCTSavings because the state told them they had to do something. I understand why. The mandate letter shows up, the program costs the employer nothing, and registering looks like the fastest way to make the problem go away. For a business that would otherwise offer nothing, that is a reasonable first step.
But I want to be direct about what you actually signed up for. MyCTSavings is not a retirement plan in the way a 401(k) is. It is an IRA program. Each employee gets a Roth IRA, you send their payroll deductions to it, and that is about the end of it. And when you compare it with other IRAs, it is an expensive one.
If you have five or more employees, Connecticut law says you either facilitate MyCTSavings or offer a qualified retirement plan. A 401(k) satisfies that requirement. My argument is simple: for most small businesses, a 401(k) is the better choice for both the owner and the employees, and the reasons people give for avoiding one are mostly out of date.
MyCTSavings is just an IRA program
Strip away the branding and here is what MyCTSavings is. Employees are automatically enrolled in a Roth IRA unless they opt out. The money comes out of their paycheck after tax. The employer cannot contribute. There is no pre-tax option. And because these are IRAs, they follow IRA rules, including IRA contribution limits and Roth IRA income limits.
Those limits matter. For 2026, an employee can put $7,500 into an IRA, or $8,600 at age 50 and older. In a 401(k), the same employee can defer $24,500, or $32,500 at age 50 and older, and $35,750 at ages 60 through 63. That gap is huge for anyone who is behind on saving, which describes most of the people I meet.
Business owners get the worst of it. Many owners earn too much to contribute to a Roth IRA at all. For 2026, the Roth IRA phase-out runs from $153,000 to $168,000 of income for single filers and from $242,000 to $252,000 for married couples filing jointly. So the program you run for your team often does nothing for you. A 401(k) has no income limit on deferrals, and it opens the door to employer contributions and profit sharing that can make a real difference for the owner.
As IRAs go, it is an expensive one
MyCTSavings is free for the employer. It is not free for the employee. The program charges an asset-based fee of about 0.23% a year plus a $26 annual account fee, collected at $6.50 a quarter. Your employees pay all of it.
That flat $26 fee is what makes it expensive. On a $1,000 balance, the total comes to about $28 a year, or roughly 2.8% of the account. On a $5,000 balance, it is about $37.50, or 0.75%. Even at $20,000, it is about $72 a year. Compare that with the Roth IRA an employee could open on their own at a large brokerage firm, often with no account fee and index funds that cost a few hundredths of a percent. Most new savers start with small balances, so the fixed fee hits hardest at exactly the point where every dollar counts.
To be fair, a small 401(k) has costs too. The difference is what you get for the money and who can pay for it. In a 401(k), the employer can pay some or all of the plan's costs, federal tax credits can offset much of what the employer pays in the early years, and employees get a far more complete benefit. In MyCTSavings, your employees pay for an IRA they could often get cheaper elsewhere, with nothing extra attached.
| MyCTSavings | 401(k) | |
|---|---|---|
| What it is | A Roth IRA in each employee's name | An employer-sponsored qualified retirement plan |
| 2026 employee limit | $7,500 ($8,600 at 50+) | $24,500 ($32,500 at 50+; $35,750 at ages 60 to 63) |
| Pre-tax option | No, Roth only | Yes, pre-tax and Roth |
| Employer contributions | Not permitted | Match, profit sharing, and more |
| Income limits | Roth IRA income limits apply | No income limit on deferrals |
| Who pays the costs | Employees: about 0.23% a year plus $26 | Employer, employees, or a mix |
| Employer tax credits | None | Startup, contribution, and auto-enrollment credits |
| Education and planning | No advisor meetings or planning | Available through your plan advisor |
| ERISA protections | No | Yes |
| Employer fiduciary role | None | Yes, but most of the work can be outsourced |
What a 401(k) gives your employees that an IRA program never will
The contribution limits, the employer money, and the pre-tax option are the obvious advantages. The bigger difference, in my experience, is the help that can come with a 401(k) when you work with the right advisor. MyCTSavings has no advisor meetings, no planning, and no one to call who knows your business. A well-run 401(k) can include:
Participant education. Enrollment meetings and one-on-one conversations about how much to save, pre-tax versus Roth, and how to choose investments.
Help with outside accounts. Old 401(k)s from prior jobs, IRAs, a spouse's plan. Employees get help looking at the whole picture, not just the account at your company.
Budgeting and financial planning software. Tools that let employees build a budget, track goals, and see whether they are on pace for retirement.
On-site and off-site workshops. Sessions at your business or outside it on topics like budgeting, paying down debt, saving for college, and getting ready to retire.
Not every 401(k) comes with all of this. A plan bought off a website with no advisor usually does not. But these services are available to small plans today, and I think they are among the most valuable things a small employer can offer. People remember who helped them get their finances in order.
Tax credits can pay for the plan and the help that comes with it
This is the part most business owners never hear about. SECURE 2.0 made the small employer retirement plan credits much bigger. They are credits, which reduce your tax bill dollar for dollar, not deductions.
Startup cost credit. If you have 50 or fewer employees, the credit covers 100% of the eligible costs to set up and administer the plan and to educate employees about it, for each of the first three years. The annual cap is the greater of $500 or $250 per eligible non-highly compensated employee, up to $5,000. Employers with 51 to 100 employees get 50%.
Employer contribution credit. Up to $1,000 per eligible employee for employer contributions, at 100% in years one and two, then 75%, 50%, and 25% in years three through five. It does not apply to contributions for employees who earn more than about $100,000 (the threshold is indexed for inflation), and it phases down for employers with more than 50 employees.
Automatic enrollment credit. An extra $500 a year for three years when the plan includes an eligible automatic enrollment feature.
Put those together and the math changes. Because the startup credit covers the cost of running the plan and educating employees about it, a plan whose service package includes enrollment meetings, one-on-one sessions, workshops, and planning tools for you and your team can have much of that cost offset in the first three years. Depending on your headcount and your plan's fees, the credits can cover most or all of what you pay out of pocket in those years. In plain terms, the government is helping you pay for a retirement plan that comes with real financial guidance attached, while MyCTSavings asks your employees to pay for an IRA that comes with none.
The credits have rules. You generally cannot have maintained a retirement plan for substantially the same employees in the prior three years, the plan must cover at least one non-highly compensated employee, and you cannot both deduct a cost and take the credit for it. Your CPA should confirm which of your costs qualify before you file Form 8881.
The three myths that keep owners in MyCTSavings
When I ask owners why they went with the state program instead of a 401(k), I hear the same three answers. A 401(k) is too expensive. It is too complicated. The fiduciary risk is too scary. Each of those made sense 15 or 20 years ago. None of them hold up well today.
"It's too expensive." For an eligible small employer, the credits above can offset most or all of the employer-paid plan costs for the first three years, and the contribution credit helps pay for a match or other employer money for five. Pricing for small plans has also come down as the technology has improved. And remember, MyCTSavings only looks cheaper because your employees are the ones paying for it.
"It's too complicated." Several small plan providers now advertise that a business owner can design and set up a plan online in as little as 15 to 30 minutes. With a local advisor, it is often even easier, because the advisor handles the plan design questions, completes most of the paperwork, and walks you through what to sign. Your part can be a short meeting and an e-signature.
"The fiduciary risk is too scary." This is the one I hear most, and it is the most overblown. Yes, sponsoring a 401(k) makes you a fiduciary. No, that does not mean you are personally on the hook every time the market drops. Fiduciary duty is about process: acting in the participants' interest, keeping fees reasonable, choosing good providers, and making sure contributions get deposited on time. The excessive fee lawsuits that make the news have mostly targeted large plans with hundreds of millions or billions of dollars in assets. And today, even the smallest plans can hand most of the fiduciary workload to professionals.
Outsourced 3(16) and 3(38) services, explained
Outsourced fiduciary services used to be mostly a large plan feature. Now they are available to plans with a handful of employees. There are two you should know about.
A 3(16) plan administrator takes on much of the day-to-day administrative work that ERISA would otherwise put on you as the plan administrator. Depending on the agreement, that can include signing and filing the annual Form 5500, sending required notices to participants, reviewing and approving loans and distributions, tracking eligibility, and monitoring whether payroll contributions are deposited on time. The scope varies from provider to provider, so read the service agreement and know exactly which duties they are taking on.
A 3(38) investment manager takes discretionary responsibility for the plan's investment menu. They choose the funds, monitor them, and replace them when needed, and they acknowledge that fiduciary role in writing. When you prudently hire and monitor a 3(38), ERISA generally relieves you of liability for that manager's investment decisions. In my own practice, I serve as the 3(38) investment manager on the plans I manage.
Here is the honest part. You can never fully outsource fiduciary responsibility. As the plan sponsor, you are still responsible for prudently selecting your providers, monitoring them over time, making sure the fees are reasonable for what you receive, and acting in your employees' interest. But a 3(16) administrator plus a 3(38) investment manager is about as close as you can get. For most small business owners, what is left is a reasonable amount of oversight, not a full-time job and not a legal minefield.
Why a local advisor makes a 401(k) easier than the state program
One of the biggest changes in the small plan market is the rise of independent local advisors who work with these modern 401(k) platforms. You get the fast setup and lower cost technology, plus a person who knows your business and can come to your office.
That matters most at payroll. A 401(k) only works if the right amount comes out of each paycheck and gets to the plan on time. A good local advisor will help set up the integration between your payroll provider and your plan, check the first few payrolls to make sure the numbers are right, and in some cases take on the ongoing payroll process for you. When an employee changes their contribution or a new hire becomes eligible, you have someone to call who already knows your setup.
With a state IRA program, nobody is assigned to your business. MyCTSavings connects with a long list of payroll providers, but the work is still yours. You register employees, keep your roster current as people come and go, and make sure contributions go out every pay period. If your payroll provider is not one of the integrated ones, the uploads land on your desk too. There is no one from the program coming to your office, and no advisor sitting down with your employees.
That is the irony. Owners pick MyCTSavings because it looks like less work. With a local advisor handling setup, payroll integration, and employee meetings, a 401(k) is often the easier option to live with.
The bottom line
If your business would otherwise offer nothing, MyCTSavings is better than nothing. But I would not call it a retirement plan. It is a Roth IRA program with a payroll deduction attached, and your employees pay more for it than they would for an IRA they open on their own.
A 401(k) gives your team more room to save, a pre-tax option, employer money, ERISA protections, and real help with their finances. Tax credits can pay for much of it in the early years. Setup can take less time than a staff meeting. Outsourced 3(16) and 3(38) services take most of the fiduciary weight off your shoulders. And a local advisor can handle the payroll connection that the state program leaves to you.
If you are a Connecticut business owner registered with MyCTSavings, or you just got the letter, it is worth an hour to see what a 401(k) would actually cost you after the credits. The answer surprises a lot of people.
This article is for educational purposes only and is not tax, legal, or individualized investment advice. Tax credit eligibility depends on your business's specific facts and the rules in effect for the year, so confirm with your CPA before claiming any credit on Form 8881. MyCTSavings fees and program features are based on publicly available program materials as of October 2026 and may change. Contribution limits shown are for 2026. Northshire Consulting LLC | Registered Investment Advisory Firm provides 401(k) advisory services to employers and is compensated for those services.