A lack of financial security is diminishing the Rocky Mountain high for the many Colorado employees who don’t have access to an employer-sponsored retirement savings plan. To help address this problem, the state government created Colorado SecureSavings.
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What is Colorado SecureSavings?
SecureSavings is a state-sponsored retirement savings program. Eligible employers are required to participate in the program or sponsor another qualified retirement savings plan, such as:
- 401(k)
- 403(a) qualified annuity plan
- 403(b) tax-sheltered annuity plan
- 408(k) simplified employee pension
- 408(p) SIMPLE IRA
- 457(b) governmental deferred compensation plan
How does Colorado SecureSavings work?
SecureSavings is a Roth Individual Retirement Account (IRA), which means it uses post-tax payroll deductions to help employees save for the future.
Enrollment
Employees are automatically enrolled in SecureSavings at a five percent savings rate after working 180 days with an employer who is registered for the program. Their participation is voluntary, so they may opt out and re-enroll at any time.
Contributions
The default contribution rate is 5%, but employees can change it whenever they choose. Options range from 1% to 100% as long as the total annual contributions are within IRS limits. If employees do nothing, the rate increases by 1% annually up to 8%. Employers are neither required nor permitted to contribute.
Transfers
Rollovers from a SecureSavings account directly to another type of IRA are tax-free and not subject to penalties. The IRS permits such transfers between IRA accounts once per year.
Note: plan participants should review their fees and expenses, including any charges associated with transferring their account. They should also consider whether such a transfer changes any features or benefits that may be important to them.
Administrative fees
The cost to administer SecureSavings is covered solely by employees. There is an annual asset fee of 0.32%, i.e., $0.32 for every $100 in an account, and an annual account fee of $22.
Which employers need to register and when?
Colorado employers may be required to register for SecureSavings if they:
- Are registered to conduct business in CO
- Have been in business for two or more years
- Employ at least five people who have worked at least 180 days
- Don’t already offer a qualified retirement savings program
The state will contact those who meet these criteria to let them know their registration deadline.
What if employers already offer another retirement plan?
Employers who sponsor a qualified retirement savings plan on their own are exempt from SecureSavings. They can certify their exemption online using the access code provided to them by the state.
Which employees are eligible to participate in Colorado SecureSavings?
SecureSavings is open to employees who are 18 or older and have earned taxable wages from a Colorado employer for at least 180 days. Their modified adjusted gross income (MAGI) cannot exceed the IRS limit for contributing to an IRA.
What are the benefits of Colorado SecureSavings?
Retirement savings programs can help employers attract and retain talent, but some may not have the time or the resources to sponsor a plan on their own. Such businesses might find SecureSavings appealing. It charges no fees to employers, has minimal administration and integrates easily with payroll systems. Employers also have no fiduciary responsibilities with SecureSavings and do not have to match employee contributions.
How do businesses register for Colorado SecureSavings?
Signing up for SecureSavings is easy, but some basic information is required, including:
- Employer identification number (EIN)
- Access code provided by the state
- Payroll provider’s name, if using one
- Payroll schedule
- Bank account information
- Employee roster
How does Colorado SecureSavings compare to other retirement plans?
ADP designs retirement plans that work better
| Features | Colorado Secure Savings IRA | ADP 401(k) | ADP SIMPLE | ADP SEP |
|---|---|---|---|---|
| Auto Enroll | 5% | Available | Available | N/A |
| Auto Escalation | 1% on each January 1 following enrollment up to 8% | Available | N/A | N/A |
| Payroll Integration | Manual via website | Full integration | Full integration | N/A |
| Investment Option | 3 funds + State Street Target Date Series | Broad range of funds | 65+ options | 65+ options |
| Investment Advice | N/A | Available | Available | Available |
| Taxability | Roth after-tax contributions | Pretax & Roth contributions | Pretax contributions | Pretax contributions |
| Annual Contribution Limit | $6,500 employee contributions + $1K catchup (over 50) | $23,000 employee contributions + $7,500 catchup (over 50) + optional employer contributions | $16,000 employee contributions + $3,500 catchup (over 50) + employer contributions | 25% of total compensation up to $66,000 (all employer contributions) |
This information is intended to be used as a starting point in analyzing state-mandated retirement plans and is not a comprehensive resource of all requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
Unless otherwise agreed in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisor or firm for the provision of advice; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans. All ADP companies identified are affiliated companies.
ADP, Inc. is affiliated with ADP Broker-Dealer, Inc. (“ADP BD”), a limited purpose broker dealer registered with the Financial Industry Regulatory Authority (“FINRA”), and operating pursuant to Securities and Exchange Commission (“SEC”) Rule 15c3-3(k)(2)(i), approved by FINRA to offer 401(k) and SEP/ SIMPLE IRAs, and related retirement plans (the “Retirement Products”) on a payroll deduction basis.
