Some in the financial services industry have lied to business owners about the Colorado SecureSavings Program. They give misleading presentations and information designed to trick business owners into buying expensive financial and investment services. While there are some new requirements, they generally do NOT require professional assistance.
Colorado employers are NOT currently required to pay for employee 401(k) plans.
You can learn more about the program directly from the state website.
What does the Colorado SecureSavings Program require?
Starting in 2023, employers must either provide a retirement plan or automatically enroll employees in the Colorado SecureSavings Program. Examples of employer plans include a 401(k), SEP IRA, or a SIMPLE IRA, among many others. Employers who do not offer a plan must enroll in a free account and withhold employee contributions into a free Colorado SecureSavings Program Account. The Colorado SecureSavings Program is paid for with employee (not employer) contributions.
Contributions for the Colorado SecureSavings Program will be automatic and submitted by the employer, which is confusing. The source of the funds is the employee’s earned wages. The contribution is NOT in addition to the earned wages and does NOT need to be provided by the employer. Consider talking to employees before the change takes effect because if their base pay is unchanged, their take-home pay will go down.
Employees can opt-out of the program but must follow the program rules. Employers cannot opt-out on behalf of an employee.
Employers do not have to pay fees to the state to participate but may have additional costs to ensure their payroll systems are compliant.
The rules will only apply to employers with at least 5 employees who have been in business for at least 2 years.
What is the misleading marketing?
Some unscrupulous financial professionals are using this as an opportunity to sell expensive retirement plans that are not required under the law. I’ve seen and heard about statements that range from misleading to false. Here are some examples.
MYTH:
Employers must create and provide a retirement plan for employees.
FACT:
Some employers who do not offer a 401(k) plan must facilitate a free Colorado SecureSavings plan.
(Source)
MYTH:
If you don’t pay for a 401(k), you must make matching contributions to the state.
FACT:
While you may choose to open a 401(k) with matching contributions, you are not required to do so. Employees at companies without a retirement plan will have automatic withholding to a Roth IRA.
Matching contributions are not permitted for a Colorado SecureSavings Program account.
(Source)
MYTH:
Employers must create and provide a retirement plan for employees.
FACT:
Employers who administer a 401(k) plan have fiduciary responsibilities, but the state of Colorado administers the Colorado SecureSavings plan, not the employer.
(Source)
This page is paid for by Delagify Financial as a public service announcement. It does not constitute tax, legal, or financial advice.
The references herein are based on publicly available information and are believed to be reliable. Additionally, the content of this presentation has not been approved or verified by any sources.