Retirement savings is something that every Denver family and individual knows they should be doing, but it often gets overlooked due to immediate needs. This is especially true when considering the issues created by the pandemic. However, the reality is that many are simply not saving enough for the “golden years” often over-relying on social security and other expected benefits. One contributing factor to the savings shortfall is the lack of access to an employer-sponsored retirement plan. In fact, it was recently reported that almost 55 million Americans do not have access to a plan at work. Lack of access to a plan has been found to be a serious obstacle to savings prompting both the federal and state government to act. In 2019, Congress passed the SECURE Act which included tax credits for new plan startups and automatic enrollment features. More recently, the state has passed a measure creating the Colorado Secure Savings Plan (CSSP), a savings plan for private-sector employees. The new program requires employers with 5 or more employees to participate. To help clients, prospects, and others, Hanson & Co has provided a summary of the key details below.

Key Program Details

The CSSP is a state-mandated workplace retirement plan designed to provide a retirement savings option to employees currently without one. Essentially, any Colorado employer with 5 or more employees that do not currently offer a retirement plan will automatically be enrolled. Not every employee will be eligible to participate as there are specific participation rules, including:

  • Participating employees must be 18 years or older.
  • Must have earned taxable wages from a Colorado employer for at least 180 days.
  • Can not be enrolled in another eligible plan.

Eligible employees will be automatically enrolled with a default deferral rate of 5%. However, those who want to change the deferral amount or simply opt-out will be able to do so.

Employer Responsibilities

Employers required to participate will not be required to deal with the plan administration issues typically associated with other retirement plan types (i.e., 401k plans).  These tasks will largely be addressed by the Colorado Secure Savings Plan Board of Trustees which are responsible for establishing investment options, allocation of earnings, conduct reviews of the performance of investment vendors, set maximum contribution levels, facilitate participant education, and more. Finally, employers are not required to make matching contributions but may do so if desired.

Additional Details

Currently, no effective date has been announced. It is expected there will be a phased rollout starting with companies that have 100 or more employees. Employers can also face penalties for noncompliance such as a failure to enroll eligible employees, $100 per employee per year (up to $5,000 annually). Enforcement will begin one year after the due date is set for employer enrollment.

Contact Us

The new Colorado Secure Savings Program is an opportunity for Denver businesses to offer a retirement savings option. However, some will find it more advantageous to opt-out, start up a new retirement plan and take advantage of available tax incentives. If you have questions about the information outlined above or need assistance with your 401k plan audit, Hanson & Co can help. For additional information call us at 303-388-1010 or click here to contact us. We look forward to speaking with you soon.