Businesses with Five or More Employees to Participate in the Colorado SecureSavings Program
Nearly 940,000 Colorado workers lack access to qualified retirement savings plans. Beginning January 1, 2023, Colorado employees whose employers do not offer a retirement plan have access to the optional state-facilitated Colorado SecureSavings program. The new law requires all employers in Colorado that meet certain requirements to facilitate employee participation in the SecureSavings program through payroll deductions. Employers that have been in business for two or more years, have five or more employees, and do not already have a retirement savings plan in place will be required to set up payroll deductions, from which employees may opt out. These payroll deductions are contributed to a Roth Individual Retirement Account (Roth IRA) on behalf of the employee through this program.
All employees 18 and older who have earned wages in Colorado for at least 180 days are eligible and will be automatically enrolled in the SecureSavings program. Employees have 30 days once enrolled to opt out or customize their contribution amounts. Failure to opt out or customize within 30 days will automatically contribute 5% of their after-tax compensation. Contributions will automatically increase 1% (up to 8%) each January unless adjusted by the employee. If an employee does not make an election regarding how his or her Roth IRA is to be invested, it will initially be invested in the Capital Preservation Option—a "cash-like fund" invested in money market securities—and then will be transferred to the Target Retirement Date Option with a target date that is closest to the employee's expected year of retirement. Employees can make additional contributions to their Roth IRAs by check, from a bank account. SecureSavings plans “travel with” the employees even if they change jobs or leave the state.
Employers should have received a notice by email or US mail in early 2023 to register with SecureSavings. If an employer is not opting out of the program they must provide their payroll vendor’s name, payroll schedule, company bank information, employer contact information and an employee roster. However, employers are not responsible for and should not engage in setting up their employees’ accounts, helping them choose investments or answering questions about the SecureSavings programs, managing, or advising their employees’ accounts or making contributions to their employees’ accounts. Additionally, employers may opt out of the program if they already sponsor a tax-qualified retirement savings program such as a 401(k), 403(b), Simplified Employee Pension, or a Simple IRA.
The deadlines and penalties for compliance with the SecureSavings program vary based on how many employees you have. For employers with 5-14 workers, the deadline to register or apply for an exemption is June 30, 2023. For employers with 15-49 workers, the deadline to register or apply for an exemption is May 15, 2023. For employers with 50 or more employees, the deadline to register or apply for an exemption was March 15, 2023. While failure to timely register or apply for an exemption may result in a fine of up to $100 per employee per year, up to a maximum of $5,000 per year, enforcement of this rule begins one year after the due date set for the employer enrollment based on the number of employees in the business’ workforce.
For further information and assistance with navigating Colorado’s new SecureSavings program, please contact the skilled Colorado employment law attorneys at Galvanize Law Group to avoid legal consequences for non-compliance. Additionally, our team is here to help you better understand the general obligations imposed on employers by both federal and state law.