Colorado Mandates Small Business Retirement Plans

As small businesses, there is so much to balance as we care for our employees. This past year has undeniably kept Colorado small business owners on their toes and busy with a myriad of legal changes. We see all the hard work these changes have required and are proud of the way our community has stepped up to the plate and prevailed! More changes may not be business owners’ top priority this year, but the Colorado General Assembly has their own action plan that will impact us none the less. In the next year, they will be mandating a state sponsored retirement savings plan, the Colorado Secure Savings Program. This plan is designed to make retirement savings more accessible to the Colorado workforce.

With continually pressing financial demands of the present, creating savings to use years from now is often not at top of mind. The fact is financial planning and retirement savings can make for a more predictable future and are exponentially more effective the sooner they begin. At current estimates, 40% of the Colorado Workforce does not have access to a Retirement Savings Account¹. The Colorado Secure Savings Program was created with the intent that a lack of retirement savings delays or prevent workers from being able to retire and create a tendency for them to lean more heavily on government supports if they do. Financial safety and education can increase productivity, and ultimately lead to more secure later years for workers.

While workers have always had the option to pursue savings on their own, this new program will include state mandated automatic enrollment. It will function much like any other retirement savings plan, with the employer requirement to set up enrollment and manage payroll deductions. Employees will be able to opt-out if they wish, but the goal is the make saving accessible and easy through automatic payroll deductions. With this, a portion of the administration and liability of the plan will fall to employers.

The Colorado Secure Savings Program was signed into law in July 2020, but the implementation plan is still being developed and there is a lot we are waiting on clarification for. We recommend understanding and preparing as much as you can now, so you are ready to go when implementation hits. Here’s what we do know:

Who needs to comply:

• Employers who have been in business for 2 or more years and have 5 or more employees will need to implement the program.
• Employers with less than 5 employees or who have not yet been in business for 2 years will not be required but will have the option to offer participation to their employees.
• Implementation will likely be phased in, beginning with businesses with 100+ employees.
• The program is centered around a state sponsored IRA Roth. (Individual Retirement Account)

What needs to be done:

• Employers will be required to offer automatic enrollment and facilitate payroll deductions into the program.
• Employees will be able to change their contribution amount or opt out if desired.

Penalties, or alternate options:

• Fines for noncompliance will be $100.00 per employee per year up to $5000.00 per year. The compliance period is 1 year after implementation, and fines won’t commence until that point
• Employers can opt-out of participating in the state sponsored program if they offer a separate qualifying retirement plan. Examples include a 401k or Simple IRA, with or without an employer match.

Needs for clarification:

• Implementation dates and timeline – Currently, implementation appears to be targeted to begin phasing in Spring 2022, but no dates have been announced.
• Guidelines for implementation – We have some basics, but the how is still very undefined.
• Incentives and Grants – There will likely be these types of options for offering separately qualifying plans.

If you have not yet implemented a retirement savings plan, you are not alone! Many small businesses are going through this will you. As we wait for clarification and the official implementation of the Colorado Secure savings program, it’s not a bad idea to consider all the various retirement plan options available to you and your company. When implementation is eventually finalized, we can soundly expect that there will be a slew of businesses rushing to comply at the same time – getting a head start can only benefit you!

The Colorado Secure Savings Program defines that private plans will qualify under their requirements. Seeking quotes and guidance from private plans under the advice of a CPA will help you make the best-informed decision possible. While the state of Colorado is laying the groundwork for their plan, there is little to no guarantee of the level or quality of support that will be available to business owners along the way. Private plans typically come with the support of private advisors regarding plan types and how best to implement for your business. They are there to answer questions and be your point of contact though the whole process and lifetime of your plan, while there is no such promise from the state.

It can be intimidating to get started, both for employers and employees, but know that you are not alone, and there are resources to help! Keep an eye out for future blog posts about the Colorado Secure Savings Program as we learn more. If you are looking to dig in deeper, HR Branches can introduce you to the right people to support you.

^{Disclaimer: HR Branches provides general information about Human Resources. Please note that the information provided, while reliable, is not legal advice. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make sure your legal interpretation and decisions are correct for your location and circumstances. The purpose of this information is for guidance, ideas, and assistance on general HR matters.}

More Resources to explore:

^{1SB 20-200: Colorado Secure Savings Program:  Full Act from the Colorado General Assembly}

^{Colorado Secure Savings Program Webinar: HRB and Katie Wendland of Human Interest}

^{Program review by Human Interest: Katie Wendland of Human Interest}

Jackie Copeland, BS in Human Resource Management

A grateful Coloradan transplanted from upstate New York, Jackie is a self-proclaimed wonderer, puzzler, and problem solver, always looking to expand her knowledge and skills to serve those around her. In her career she has supported human resources and recruiting functions at a range of organizations, partnering with established community centered non-profits, a startup tech company, and a healthcare organization. Jackie is now lending her expertise to HR Branches and the small business community. Outside of work Jackie loves to read, bake, and adventure with her husband and two giant dogs.