Colorado Implements Savings Program for Workers Without Employer-Sponsored Retirement Plans

​Beginning in 2023, Colorado employees whose employers do not offer a retirement plan will have access to an optional retirement savings plan through a state-facilitated retirement savings program, the Colorado SecureSavings program.

The law requires all employers in Colorado 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 to facilitate the program by providing their employees the opportunity to save for retirement through payroll deductions.

All employees who are at least 18 years old and have earned wages in Colorado for at least 180 days are eligible and will be automatically enrolled in the program. Once enrolled, employees will have 30 days to either opt out or to customize their contribution amounts, investment options, and beneficiaries. Employees who do not opt out within 30 days of their enrollment date will automatically have 5 percent of their compensation withheld on an after-tax basis and contributed to a Roth Individual Retirement Account (Roth IRA) on their behalf. Contributions will be automatically increased by 1 percent each January up to a maximum of 8 percent, unless otherwise 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.

Employer Obligations

In early 2023, all Colorado employers will receive a notice from the state to register with Colorado SecureSavings. If the employer sponsors a tax-qualified retirement savings plan for its employees, such as a 401(k), 403(b), Simplified Employee Pension (SEP), or SIMPLE IRA, the employer may opt out of the program.

If the employer does not sponsor a retirement savings plan for its employees, the employer must provide its payroll vendor's name, payroll schedule, company bank information, employer contact information, and an employee roster.

Employees included on the roster will be automatically enrolled in SecureSavings and then have the option to opt out or make other elections. Employees hired after the date of registration must be enrolled in the SecureSavings program within 180 days of their hire dates.

Once employees have made their investment selections or opted out, employers will need to update participating employees' contribution rates within their payroll system to ensure contributions are properly withheld and transmitted to the program. Contributions to the program must begin with the payroll immediately after the 30-day opt-out period has passed, based on the employee's contribution elections. Employers have an obligation to keep employee rosters and payroll contribution information updated.

Under the program, employers are prohibited from setting up or managing employees' accounts, managing investment options, or answering questions about the program and its investment options. Additionally, employers are not permitted to provide any tax, legal, or other financial advice regarding their employees' accounts. Further, contributions remitted to the program do not need to be reported on an employee's Form W-2. Employees will receive a Form 5498 (IRA Contributions Information) directly from the trustee for the program no later than May 31 each year.

Next Steps

In early 2023, all Colorado employers should be on the lookout for a notification and information from the state regarding the program. The notice and information may be sent by email or U.S. mail. After receipt of the notification, employers will have 30 days to either register with the program or apply for an exemption. For employers with 5-14 workers, the deadline to register or apply for an exemption is June 30. For employers with 15-49 workers, the deadline is May 15. For employers with 50 or more workers, the deadline is March 15.

A 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.

Ruth Anne Collins Michels is an attorney with Ogletree Deakins in Atlanta. Rebecca M. Lindell is an attorney with Ogletree Deakins in Denver. © 2022. All rights reserved. Reprinted with permission.