In the face of a bleak forecast for employee retirement savings, there is no question we all have a stake in addressing a potential calamity. While personal responsibility certainly should be a hallmark of any solution, like it or not, a new state law places the administrative burden on our businesses, with a pending deadline for compliance. Let this article be your warning notice and compliance map, but ﬁrst some history.
Less than a generation ago, the perspective on one’s work life and eventual retirement was quite diﬀerent. Back then, long-term service for a single company was commonplace. Decades of loyalty were not just rewarded by a gold watch and retirement party but were accompanied by a healthy pension plan. Combined with Social Security, a company pension oﬀered the assurance of a steady, and typically comfortable, retirement income as an inducement to extended employment tenure.
In today’s economy, the average time an employee spends at a particular company is signiﬁcantly shorter than it was years ago. Responding to that evolving career dynamic, most larger companies moved from oﬀering pensions to a portable defined contribution 401(k)-style oﬀering for their employees. Not only do these plans reﬂect the retirement needs of a more mobile workforce, but these types of 401 (k)-style retirement plans can also provide employees with more ﬂexibility in investment and savings options. Further, matching strategies and other incentives aﬀorded by these plans have served as both employee recruitment and retention tools.
However, as scale plays a big part in a company’s ability to oﬀer such retirement beneﬁts, many smaller businesses simply cannot justify carrying these plans. The Treasurer’s Oﬃce has estimated that nearly 40% of Colorado’s workforce, about 940,000 individuals, don’t have access to retirement- savings accounts through their workplace. Combined with the burden of increasing cost-of-living expenses, today’s workers just aren’t saving enough for retirement. According to Fidelity, workers between the ages of 30 and 40 hold less than $40,000 in retirement assets.
To stave oﬀ the potentially disastrous implications of the retirement savings deﬁcit, the state Legislature passed the Colorado Secure Savings Program Act in 2020. The Colorado Secure Savings Program Act requires all businesses with ﬁve employees or more, that have been operating for two or more years in Colorado, to develop a qualiﬁed retirement plan for their staﬀ.
The standard means of complying with Colorado’s Secure Savings Program Act fall into two categories: “the state does it for you” or “you do it yourself.” Via a program created by the Colorado SecureSavings Board, companies can opt-in to a free state-wide employee retirement savings program, the Colorado Secure Savings Program. More information on the Colorado Secure Savings Program is available here: treasury.colorado.gov/colorado-securesavings-program. Alternatively, companies can pursue their own plan independently.
While the state-managed retirement plan is limited in options, and as independently pursuing a standalone plan can be costly, the Boulder Chamber and our retirement consultant, First Western Trust, are taking a creative approach whereby “we do it together.”
Boulder Chamber members will soon be able to participate in what is called a Multiple Employer Aggregation Program (MEAP). In short, a MEAP combines the retirement investments from employees of many small companies to create an aggregated asset balance that both provides negotiating power and creates more investment flexibility. In addition, through engagement of a 3(16) third-party administrator that manages all the plan logistics and a 3(38) Investment Manager, our participating member businesses eliminate the internal managerial and financial overhead of adopting an employee retirement savings plan, monitoring its performance, and facilitating employee education and outreach. You can learn more about enrolling in the Boulder Chamber MEAP by contacting Kristin Jacobson at Kristin.Jacobson@myfw.com.
Regardless of the approach you take to meeting the Secure Savings Program Act requirements, we all have the incentive to encourage our employees to save for their retirement. The potential ramiﬁcations of the current retirement savings deﬁcit could be tragic for our workforce and place a heavy toll on society. Let’s do it together!