Not so much for taxes
According to benefit plans analysts Judy Diamond Associates, Connecticut is the best state in which to have a 401(k) plan. The number-one designation stems from the state having the highest concentration of “strong plans.”
“Those states with the highest concentration of top plans have higher participation rates and more employer generosity than other states,” says Eric Ryles, managing director of Judy Diamond Associates.
Rankings are based on the percent of 401(k) plans receiving top plan scores among all 401(k) plans in each state. Plan scores are calculated with an algorithm that considers key measures of the strength of a plan’s design, management, and performance, as well as how each of those metrics compares to nationwide benchmarks.
Plans receive scores up to 100 based on information they report to the U.S. Department of Labor annually. A top score is anything above 80. In Connecticut, 6.86% of 401(k) plans are top-score plans, followed by Wyoming (6.79%), Alaska (6.78%), Delaware (6.70%), and Massachusetts (6.57%).
Hang On to That 401(k)
It’s a good thing Connecticut is the best state for 401(k) plans, because you’ll need the tax advantages they offer if you live here.
In March, financial site WalletHub released its 2014 Best & Worst States to Be a Taxpayer report, which put Connecticut at 48th, the fourth worst state among all others and the District of Columbia. When Connecticut’s tax burden was adjusted for cost of living, the state dropped to 49th.
Connecticut residents annually pay an average $9,099 in state and local taxes, or 31% more than the national average according to the report.
There’s no doubt that Connecticut has many impressive competitive advantages. Being a top state for 401(k) plans is just one. Unfortunately, we rank poorly in most national business climate surveys, which rely on factors such as states’ tax burdens to determine the best and worst places for business.
The WalletHub report underscores the need for Connecticut to focus on improving the state’s economic competitiveness—the main goal of CT20×17. With the support of more than 50 leading business and professional organizations from across the state, CT20×17 is a broad-based, multiyear campaign specifically aimed at driving Connecticut into the top 20 states for business by 2017. Click here to learn how you and your employees can play a role. ■
For more information about the 401(k) study, contact Judy Diamond Associates here or follow them on Twitter @401kFacts.