In July 2020, state legislators passed the Colorado Secure Savings Program in an effort to help the roughly 40% of Colorado workers who currently have no access to an employer-sponsored retirement plan.1
Program highlights for employers and employees
Many of the details of the program offering - including timing of its implementation - are still being determined, but here are some known details that are relevant to many of the 91,000+ employers in Colorado who currently do not offer a retirement plan:2
- Each private-sector business with five or more employees that has been in business for two or more years will be subject to the Program's requirements.
- Employer penalties for not complying with the Program (once it's launched) can be as high as $5,000 per year.
- Employers who offer a 401(k) or other qualified retirement plan will be exempt from having to enroll in the Colorado Secure Savings Program.
- There are state-sponsored tax benefits of up to $16,500 for employers who implement a 401(k) or other qualified retirement plan for their employees.
These additional details are likely important to many of the estimated 675,000 full- and part-time Colorado employees who do not currently have access to an employer-provided retirement plan.2
- Employees of eligible companies described above who are 18 or older, who have been employed for at least 180 days, and who earn taxable wages in Colorado must be enrolled in either their employer’s retirement plan or the state Program (if their employer doesn’t offer a plan).
- Employees participating in the State Program will fund their retirement through an initial automatic 5% payroll deduction, and employees will be allowed to change that withdrawal amount or withdraw those funds without penalty for at least the first two years of enrollment within the program.
These are just some of the known and relevant details that state legislators have shared so far as they work to design and implement the Colorado Secure Savings Program, which may launch in 2021 or 2022.
An alternative solution for employers
Employers who are not eager to participate in the eventual implementation of the state-mandated Secure Savings Program have the option to offer a 401(k) program to their employees and may receive tax benefits from the state for doing so. In our work with employers, these items rank highest on their wish list for a 401(k) program:
- Ease of implementation and administration
- Constant compliance with the myriad regulations governing retirement plans
- Protection from fiduciary liability
- A plan powered by well-known, industry-leading providers
- Reasonable cost
Royal Wealth Management offers access to just such a 401k plan through the Colorado Dental Association that is intended to be an alternative to the state-mandated Program. The solution acts as the employer's 401(k) department, maintains continuous compliance with evolving regulations, serves as the designated Plan Administrator and Named Fiduciary, leverages the scale and experience of industry titans Transamerica and Mercer - and all delivered at a remarkably competitive cost to the employer.
Employers have many options, but a limited amount of time as the Colorado Secure Savings Program moves towards implementation. Royal Wealth Management would be happy to help you explore the possibilities to find a solution that best suits both you and your employees. Let's have a conversation. Contact us at (720) 733-9143.
TAG Resources is the Plan Administrator, Named Fiduciary, 3(16) and 3(21) fiduciary to the plan. Mercer is the 3(38) Investment Manager. Recordkeeper services offered through Transamerica Retirement Solutions.
Darren W. Royal, with Royal Wealth Management, is the financial advisor to the plan and is a registered representative with, and securities are offered through, LPL Financial, member FINRA/SIPC. TAG Resources, Mercer, Transamerica Retirement Solutions, and Royal Wealth Management are all separate entities from LPL Financial.
This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
In no way does advisor assure that by using the information provided plan sponsor will be in compliance with ERISA regulations. This material does not constitute a specific recommendation or advice regarding engaging third-party service providers and should not be used as the sole factor in selecting providers for your plan. The final selection of third-party service providers is the responsibility of the plan sponsor.
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