Employers with five or more employees are to be automatically enrolled in 2023
Beginning in 2023, all employees of private companies and nonprofit organizations in Colorado will have access to a retirement fund through the Colorado SecureSavings Program.
Employers with a workforce of five or more are automatically accepted into the program. Employees have the option to opt out of the program if they have an existing retirement plan. Businesses or non-profit organizations with fewer than five employees are exempt from automatic enrollment, but their employees still have the option to enroll in the program.
The austerity program will also include part-time employees.
“In some cases, you have businesses where certain employees have access to a retirement plan but others don’t,” said Colorado State Treasurer Dave Young. “In such situations, those employees who do not have access to the program at work would then be eligible through the Safe Savings Scheme.”
If employees choose to use the program, a standard rate of 5% is deducted from each paycheck. However, employees may increase or decrease this rate at their own discretion. Because the pension fund is maintained through an individual Roth retirement account, federal law limits the amount an employee can contribute to the account each year.
Federal law caps this contribution at $6,000 per year and $7,000 if an employee is over 50 years old. Because this is a Roth IRA, it is an after-tax program, which means that taxes have already been deducted before funds enter the account.
Employees can manage these funds through the Colorado SecureSavings portal.
Young said the program is slightly different from some 401(k) plans because certain plans offer matching programs and federal law means the state cannot offer matching. He said the Colorado Department of Treasury made the program a priority because it recognized there was a national retirement savings crisis.
Through studies conducted by the Treasury Department, Young discovered that there were approximately 1 million people in the state without a pension plan through their employer.
The Treasury Department also found that most employees who were not enrolled in a retirement savings fund were low-income workers and confused by financial terminology and acronyms.
“They wanted to get started but couldn’t make up their minds because the whole financial services landscape was confusing for them,” Young said.
The Business Improvement District is interested in continuing the program. Executive Director Tim Walsworth said the program would greatly benefit some downtown businesses.
“I can imagine that many companies would like to do something like this. It helps with employee retention,” he said.
Walsworth is interested in enrolling with the BID as the employees do not have a pension fund.
Having no matching element to the Colorado Secure Savings Program makes it attractive to employers.
BID is also interested in continuing the program because of its Downtown Ambassador Program. Downtown ambassadors are part-time employees, and Walsworth is interested in finding out if they could be covered.
He said it’s important for companies to know this will happen automatically in 2023.
“If there’s a mandate or a requirement, we have to let our companies know about it,” he said.
The Durango Chamber of Commerce will host a lunchtime meeting Wednesday to discuss more details of the Colorado SecureSavings Plan with local businesses.