retirement savings

Democrats this week are pushing for a bill that would increase the chances that Colorado workers have a safety net to fall back on once they hit retirement.

Known as "secure savings," Senate Bill 200 is the result of efforts by a state secure savings board, created through 2019 legislation, that recommended this week the state create a "state-facilitated automatic enrollment individual retirement account (IRA) program." 

The plan is mandatory; employees would be automatically enrolled but can opt out. While the bill's fiscal analysis has not yet been released, a report from the secure savings board claims the plan will be "cost-neutral" to the state within 10 years.

For businesses of less than 25 employees, the bill calls for a grant program to "incentivize compliance" and cover the costs those small businesses would incur to set up the automatic deductions.

According to a statement from Senate Democrats, the plan

  • would be managed by private firms, solicited through a competitive bidding process.
  • allows workers to invest through "pooled, professionally managed accounts with low fees,"
  • allows employees to invest in the plan through automatic payroll deductions
  • is portable, which would allow workers to take it with them when they change jobs;
  • applies to businesses with five or more employees and which do not offer retirement plans; and
  • does not impact Social Security eligibility.

Self-employed workers and contractors also can enroll in the program.

Treasurer Dave Young said Monday that 40% of private sector employees don't have retirement savings plans provided by employers. "It's incumbent on us to act," he said. 

The board recommended the state set up an IRA for private sector employees who don't have retirement plans from employers. The plan would go with the employee from job to job and paid through payroll deductions. 

The plan will ensure Coloradans have access to a retirement savings plan through employers and with automatic deductions. It will be key to boosting retirement savings, said Sen. Kerry Donovan, D-Vail, one of the sponsors of Senate Bill 200.

In a few short years, most of the one million employees who don't have access to retirement plans at work will start saving through the state savings plan, she added.

According to the secure savings board's report, the state faces a fiscal impact of nearly $10 billion over the next 15 years attributable to savings shortfalls. The federal impact due to insufficient retirement savings by Coloradans is estimated at nearly $9 billion and the impact to Colorado’s local governments is more than $280 million. That's from a combination of higher expenses for assistance programs and lower tax revenues from lower incomes and spending. The report pointed out that the state budget for elderly Coloradans is $1.26 billion per year, and that's expected to more than double by 2035. Higher Medicaid costs make up most of that increase at both the state and federal level.

State Sen. Brittany Pettersen, D-Lakewood, said that as a millennial who has worked in a variety of jobs, "I know first hand how difficult it can be to try to save for retirement. Many jobs don’t offer a plan and unless you are paying into a retirement account automatically through your employer’s, it can be near impossible to consistently put money away." She said she's been working on a bill on retirement savings for seven years. 

The days when employers provided pensions or retirement plans are gone, as are the days when an employee worked for one company for years, even decades, she explained. "Our benefits system must evolve with it, because right now, too many Coloradans don’t have the ability to save for retirement through their jobs," she added.   

"If you're offered a retirement plan at work, you're 15 times more likely to save."

Rep. Tracy Kraft-Tharp, D-Arvada, said the bill does not intend to create a one-size-fits-all approach and will help small businesses navigate the complex arena of retirement savings. It will make sure there's a simple, easy-to-use option for employers who don't have retirement plans, Kraft-Tharp explained. Those who provide retirement plans are not required to participate.

Native Earth's Sarah Marcogliese, who has been in the landscaping business for 17 years, said she finally set up a plan for her employees last year. It was complicated and expensive, yet she did so because she was losing employees to companies with better benefits. She also noted that many of her employees are seasonal and can take the state plan with them from job to job. 

Pete Turner, owner of Illegal Pete's restaurants in Boulder and Denver, was a member of the secure savings board that recommended the plan. His company offers a 401(k), and has seen both the benefits and costs, which he estimated at 60 hours of work and 3% of his profits. A lot of businesses can't sustain that, he said.

The plan's cost to the state, according to the secure savings board, is based on operating costs that are projected to exceed revenues "until the fourth year of the program for the state," and the ninth year for the plan's third-party administrator. "Initial revenue growth is slow because it is generated from a fee as a percentage of assets under management, and account balances are low at the outset of the program. 

According to Young's office, the start-up costs would be around $1 million per year, based on the experience of other states, such as Oregon. According to AARP, some 30 states are looking into legislation on retirement plans for small businesses. Ten states have already implemented such plans.

The bill 's first hearing will be with the Senate Finance Committee. It is not yet scheduled.

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