A Hassle-Free Retirement Plan for Working Coloradans: SecureSavings

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Nearly 940,000 working Coloradans do not have access to a retirement savings plan through their workplace. That’s approximately 40% of all private-sector workers in the state. When gig workers and private businesses with fewer than five employees are considered, the number grows bigger.

Colorado is aiming to change that with the rollout of Colorado SecureSavings (launched 2023). 

If you’ve been in business for two years and employ five or more people, you may have some legal responsibilities. In good news, compliance is free and easy, plus it’s a benefit that can help attract and retain employees. Read on for the overview of this statewide program.

What is Colorado SecureSavings?

Colorado SecureSavings is a program that provides Colorado workers an accessible retirement savings option. 

To achieve this, eligible businesses (see below) are legally required to register online or risk fines. Registering is free and generally takes about 15 minutes. It kickstarts an automatic creation of a Roth IRA account for each listed employee, who then has a 30-day window to opt-out if they choose. Enrolled employees have full control and portability of their new Roth IRA savings plan, with businesses only needing to account for contributions through regular payroll processes.

For businesses, it’s a cost-free way to offer access to retirement benefits. For employees, it’s a low-obligation opportunity to invest and save for their future. Self-employed operators and 1099 contract workers can also sign up independently for Colorado SecureSavings.

While anybody can open an independent IRA to start saving for retirement, the overwhelming majority of people do not largely because the process can be complicated or intimidating. The goal with Colorado SecureSavings is to make it simple, easy, and effective for individuals to save for the future, without adding burdensome costs to small businesses.

Fiscal insecurity during retirement poses obvious problems for individuals. What’s less considered is the fiscal burden on the state when resources are redirected to ensure our older population has access to food, housing, healthcare and other basic needs. 

In 2019, the Colorado Treasurer’s Office analyzed statewide retirement savings and determined that inaction would cost the state more than $18 billion over the next 15 years. 

“Employers and small businesses are key to helping us work against that,” said Hunter Railey, Executive Director of the Colorado SecureSavings Program. “We wanted to provide a no cost, easy-to-use solution.”

Colorado has partnered with other states to form a retirement consortium. This gives greater leverage to negotiate cost breaks with the private vendors that administer the program and the IRA accounts. The setup means Colorado SecureSavings is on track to be completely self-sufficient (i.e. require no Colorado tax funds to operate) within three to five years.

Key Features of Colorado SecureSavings

  1. Requirements: All businesses are asked to either register for Colorado SecureSavings or certify an exemption, indicating it either doesn’t meet the requirements or it already provides a retirement savings plan benefit to its employees. 
    • Registration: Any business with five or more W-2 employees that has been in operation for two years or longer must register with SecureSavings or risk fines.
    • Certify an Exemption: If your business already offers a retirement savings plan or you don’t think it meets the compulsory requirements listed above, login and certify exemption from the program. 
    • Don’t hesitate to call the help line with questions. 
    • Registration can be as fast as 10 minutes, while exemptions take about two minutes. Automatic integrations are available for popular accounting systems, like Quickbooks. Information on payroll integration can be found here.
  2. Eligibility: Additionally, self-employed individuals, 1099 contractors, and seasonal employees may register directly and participate.
  3. Roth IRAs: Upon registration, a Roth IRA is automatically established for each registered employee. These accounts are portable if a person changes jobs.
  4. Individual Account Management and Opt-Out Rights: After a business registers, the management of the IRA is transferred to the employee. They have a 30-day opt-out window. Once enrolled, they have authority to manage their investment options and contribution rates at any time. Please note, eligible businesses are required to automatically enroll all W2 employees.
  5. Ongoing Obligation: Businesses cannot and do not match funds in Colorado SecureSavings. However, businesses do need to account for employee contributions through regular payroll processes. (Integrations and tutorials are available.)
  6. Costs: Registration and ongoing administration is free for employers. Saver fees include a $5.50 quarterly fee and a 0.32% annual asset-based fee ($0.32 for every $100 invested) is automatically deducted from their Roth IRA account to cover administrative costs. There is no registration fee for savers.

Benefits for Small Business Owners

Employers that offer benefits often attract and retain the best employees. As Colorado targets more resources to rural startups and to new programs, like Colorado SecureSavings, under-resourced small businesses can be more competitive in the quest for talent. 

Colorado SecureSavings makes retirement benefits easily accessible to small businesses that otherwise learn private retirement plans are too costly, too complicated, or not suited to their workforce (i.e transient or seasonal operations). It is an affordable option to foster long-term financial security for a team and for solopreneurs planning their own retirement.

After a business registers with Colorado SecureSavings, its primary obligation is to record IRA contributions through their regular payroll processes. This can be readily integrated via QuickBooks and other bookkeeping programs.

By design–legally and practically–business leaders registered with Colorado SecureSavings are removed from providing investment advice to their teams. 

“It’s not the employer’s job to guide their employees through choosing an IRA,” said Railey. “They simply present the opportunity to find info via the SecureSavings login or to contact a representative for guidance.”

Unlike some 401(k) benefits, this is not a program where businesses match funds with employee contributions. That is not allowed. This is an entry point, where a business can establish a baseline support benefit for its team. 

Railey added, “One hope is that this will help our Colorado businesses grow and perhaps mature into a more robust private sector plan. We’ll help with the transition when that arises.”

Benefits for Employees and Self-Employed

Toward the goal of financial security, Colorado SecureSavings provides people with access to a professionally managed retirement savings account that is overseen by a fiduciary Board. It’s easy, with contributions automatically deducted from payroll, and IRA holders have full authority to adjust or opt-out at any time. The accounts are portable from one job to another.

Roth IRAs are powerful tools in any investment portfolios, and especially for those just starting a savings plan. They are funded with after-tax dollars, which means they have potential to grow tax-free and possibly may be withdrawn tax-free after some basic conditions are met. Individuals should verify all the regulations of their specific account.

This is a tool to help close the retirement savings gap and set you and your employees up for a more stable future. 

“This is a situation where a rising tide can lift all ships,” said Railey. “The opportunity here is to greatly increase community wealth across the board and help ensure people can sustain themselves in the long term.”

Next Steps: Register or Certify Exemption in SecureSavings

Railey recommends that every Colorado business should visit coloradosecuresavings.com to either register or certify an exemption. 

“If you don’t think your business falls into the compulsory registration, it takes about two minutes to certify an exemption. Since the program will eventually begin enforcing the statute and assessing penalties for non-compliance, it’s better to have your exemption confirmed than to make assumptions.” 

This is particularly important if your business receives (or has received) a notice.

For registration, exemptions, and all other questions, SecureSavings provides many venues of support. 

Compliance Deadlines and Penalties

Failure to register or comply with the program could lead to fines up to $100 per eligible employee, with a maximum of $5,000 per year. Other violations could include inaccurate reporting or mismanagement of payroll deductions. 

Railey is quick to point out the program is still new and the onus is on his office to educate and inform businesses before assessing fines. 

“We are not going to assume that business owners know they need to be in compliance,” said Railey. “We are going to send you notices directly. If you don’t receive a notice from us, then we are not going to issue penalties against you.” 

In this early phase, the program will send multiple communications before assessing a fine. Initially, these will be compliance requests with access codes and instructions on how to register or certify exemption. If a business fails to follow through, the overseeing Board may require retroactive actions. If one year passes without the business’ compliance, fines may be assessed following a warning period. 

Important: Note that communications may come from Colorado SecureSavings or the program administrator, Vestwell.

Saving for the Future

SecureSavings has the potential to serve both rural businesses and local workforce development.

The SecureSavings team is focused on answering questions and communicating directly and clearly with employers and savers to make sure that the full benefits of the program are understood.

 

“We’re not just enrolling them in a mandated program. [We really hope] we’re setting folks up for a financial future as they work in Colorado.”

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