retirement savings

Photo by Ken Teegardin of Assisted Senior Living courtesy of Wikimedia Commons

State Treasurer Dave Young has a bone to pick with companies that his office says are hyping misinformation about Colorado's new state-mandated retirement program.

The Colorado Secure Savings Program, set to begin in 2023, requires any company with five or more employees that does not already offer a retirement program to enroll. Employees can opt out or reduce their contributions.

In a news release Monday, however, Young pointed out that some companies are putting out misinformation about the program — such as its timeline and who is required to participate.

Senate Bill 20-200 created Colorado's Secure Savings Program, the state-facilitated automatic enrollment IRA plan, following the recommendation of a state secure savings board. The law seeks to partially address the gap for 40% of privately-employed individuals who do not have retirement savings.

Hunter Railey, the Secure Savings director, said a pilot is expected to begin in October 2022, with full enrollment occurring in early 2023. That timeline is also prominently posted on the front page of the program's website.

But some companies are getting it wrong and that's led to calls and questions to the state treasurer's office.

On Monday, Young shot back.

“Sources of misleading information include poorly sourced online resources, inadequately informed sales representatives, as well as general confusion from employers," Young said in a statement. "We want to stress that no changes will take effect in 2022 for Colorado employers. The program is scheduled to begin enrollment in 2023.”

The release also noted that "unofficial online sources have promoted confusing, and sometimes conflicting, timelines and program requirements from those established by the Colorado Secure Savings Board. In some cases, the sources have wrongly led employers to believe they are required to purchase expensive or complex retirement products for their employees. Businesses will have the option of enrolling in the Colorado Secure Savings Program at no cost, or complying with their own retirement plan."

Railey added that the program "will conduct direct outreach to employers and employer representatives well ahead of the program officially taking effect. We want to take this opportunity to remind businesses that state law does not, under any circumstances, require employers to purchase a retirement plan.”

Much of the misinformation seems to be centered on the start date for the program.

Paychex, which provides 401(k) programs to small businesses, wrote in a Nov. 15 article that the program had started in mid-2021. PAI Retirement Services also reported, in an undated article, the program's start is 2021. Both are incorrect.

The Paychex article also said that the "passage of the legislation establishing the Colorado Secure Savings Program mandates businesses with at least five employees offer access to an individual retirement account (IRA) funded by automatic payroll deductions."

That statement is accurate but incomplete. It's mandatory for employers, but employees can opt out, a fact mentioned further down in the Paychex article on what employees should know.

Some of the misinformation also seems to stem from articles published just after the law was signed, but which still show up on the front page of Google searches for "Colorado Secure Savings."

A 2020 article from the investment firm Fisher Phillips reported that "administrative burdens and costs to employers will be minimal." According to Railey, that's also accurate but incomplete and likely came from a reading of SB 20-200.

While the statute requires minimal administrative burdens and costs, under the program design, there are no financial costs. Companies will need to set up payroll deductions for employees who want to participate, which could require a small time commitment. Railey also pointed out that for the smallest employers, state-facilitated funds are available to cover costs.

The program's implementation is being paid for with $1.1 million from the general fund — state revenue that mostly comes from individual and corporate income taxes.

More misinformation appears to come from investment firm sales blog posts that imply the state is forcing companies to buy a plan, Railey said. That also includes implications that companies will have legal liabilities or administrative requirements tied to the state plan or even that it's a 401(k), which usually comes with an employer match. None of that is correct, he said.

Companies' legal liabilities are limited to refusing to participate in the plan when they don't already offer another, and that carries fines.

"They're not fiduciaries in the [state] plan and have no risk. We're not requiring anyone to buy anything," Railey said. He added these posts also omit information, which can lead the reader to believe they have to set up a complicated retirement plan that they'll be on the hook for.

"We're tracking what other states are doing with these IRAs," he said, adding, "We're creating a program that is really simple to sign up for and really easy on the payroll side... We're just providing universal coverage so that everyone has the option to access a retirement plan."

Young told Colorado Politics that if a company wants to offer its own program, the company can do that, and those that do are exempt under the law.

"The goal is to create savers," Young said. "We're offering an opportunity for businesses, and a lot of small businesses know that setting up their own retirement programs can be challenging. This creates an option for employees without creating a lot of burden for businesses."

He added: "There's a lot of misinformation and (Secure Savings) has received dozens and dozens of communications from employers and employees asking, 'What's going on?' We haven't had a chance to follow up with companies that are presenting misinformation, but we will. For now, we're stamping out a lot of brush fires."

Railey added the treasurer's office simplified the home page with the timeline just to attempt to correct some of the misinformation.

Paychex spokeswoman Lisa Fleming told Colorado Politics on Wednesday that "the Paychex WORX article referenced in your story was published on August 7, 2020. At that time, the effective date for the program was targeted for mid-2021. The update, which published on November 15, 2021, addressed only the agreement between Colorado and New Mexico to partner on their state-run retirement programs. All other content, below the August 7, 2020 dateline, remained unchanged," Fleming said.

The Nov. 15 article also included the August 7, 2020, story with the incorrect implementation date.

"To ensure the latest information is available, the article has now been updated to reflect that the state’s website currently indicates that a pilot is scheduled to begin in 2022 with enrollment taking place in early 2023. We also added an additional reference reinforcing that employees may opt-out of the program, if they so choose," Fleming said.

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