save for retirement<\/a> is automatic enrollment. But to do that, the state must rely on the employer to connect workers to the system.<\/p>\nAnd that\u2019s got Tony Gagliardi, state director of NFIB Colorado, concerned for the 7,000 small businesses he represents.<\/p>\n
\u201cThere\u2019s costs associated with just setting up the plan,\u201d Gagliardi said. \u201cBut the one thing that jumps out, and one I have stressed repeatedly since this issue has been debated, the one-size-fits-all retirement plan is not suitable for everyone.\u201d<\/p>\n
There\u2019s also an ongoing national effort. In December, President Donald Trump signed Setting Every Community Up for Retirement Enhancement Act, or the SECURE Act, into law. It incentivizes employers with tax credits to automatically enroll workers in retirement plans. Opponents argue a state plan isn\u2019t necessary.<\/p>\n
If you ask Matt Rosenberg, president of RoseCap Financial Advisors in Grand Junction, most people support saving for retirement. But options are already available without the government getting involved.<\/p>\n
\u201cGenerally speaking, retirement plans are a good thing and trying to incentivize people to save for retirement on their own is good,\u201d Rosenberg said. \u201cBut when you have public institutions taking this on, they start crowding out the private sector, which is already doing this.\u201d<\/p>\n
But a main qualm is that some consider this yet another mandate for small businesses.<\/p>\n
We\u2019ve got a lot of bills in the legislature this year that are mandating things for employers. And this would be stacked on top of yet one more mandate that you would have to participate in,\u201d Hays said. \u201cThat\u2019s where it becomes a bit onerous just in trying to run your business.\u201d<\/p>\n
State Treasurer Dave Young acknowledged an auto-enroll program would be most burdensome to small businesses who don\u2019t have an HR person or don\u2019t use an automated payroll system. Reimbursing employers is a possibility, but that would add to the cost of the program, he said.<\/p>\n
If the program moves forward, the state could pay upfront and ongoing costs of around $730,000 a year to get it started, hire an administrator and work with employers to get workers enrolled. It would also set up a financial education program. A fee limited to 1% of worker contributions would help fund the program\u2019s administration. The report forecasts that the program would reach breakeven by year four for the state and year nine for the administrator, though it could operate at a loss of up to $2.4 million a year as it ramps up.<\/p>\n
The \u2018cost of doing nothing\u2019<\/div>\n
Others feel that if the state doesn\u2019t do something, Colorado faces an expensive future caring for aging adults who didn\u2019t save enough for retirement.<\/p>\n
It\u2019s the cost of doing nothing, said Bob Murphy, state director of AARP Colorado. On average, middle-class, working-age families with incomes in the 50th percentile have saved just $5,000 for retirement. And, as previously reported in The Colorado Sun<\/em>, the state is getting older.<\/p>\nThe growing number of people who don\u2019t save enough for retirement could qualify for low-income subsidies, which translates to a larger expense for the state. This year, state-funded assistance to support the elderly population is expected to be $1.26 billion. If current savings levels continue, the state expense is expected to double to $2.59 billion by 2035. The cumulative impact in the next 15 years would be $10 billion, according to the committee report.<\/p>\n
\u201cA projected $10 billion in fiscal impact to the state over the next 15 years as a result of insufficient retirement savings certainly is an eye-opener,\u201d Murphy said. \u201cIn summary, after nearly six years of AARP Colorado working on the Colorado Secure Savings Plan, we believe this report points out not just the need, but the urgency to get this bill passed, so nearly all Colorado workers have the opportunity to save for a more comfortable retirement.\u201d<\/p>\n
Young, Colorado\u2019s Treasurer, said the reason for auto enrollment is simple: Most people don\u2019t do it, though they can voluntarily set up their own retirement account.<\/p>\n
Results are already in<\/div>\n
State programs are getting more attention, with Oregon, California and Illinois starting their own in recent years.<\/p>\n
It\u2019s a promising experiment with 60-70% of participants sticking with contributing with plans, said John Scott, director of retirement savings for The Pew Charitable Trusts. But it\u2019s still early and more research is needed to see if it\u2019s working, he said.<\/p>\n
\u201cBut we still don\u2019t really understand what kind of impact this is having for employees. A lot of these workers are taking a 5% reduction in pay to save for the future. How does that affect them in the present? That\u2019s something we\u2019re interested in,\u201d he said.<\/p>\n
The Colorado committee spent nearly all of the $398,300 on consultants \u2013 Corona Insights, Center for Retirement Research at Boston College and Econsult Solutions \u2013 who analyzed best scenarios based on programs in other states. The conclusion? The plan achieves the greatest retirement savings if employees are automatically enrolled.<\/p>\n
The state of Washington didn\u2019t go the auto-enroll route. It launched its Retirement Marketplace in 2018 by creating a portal to shop for plans. But the state placed no requirements on employers or workers. A Forbes article at the time called it the \u201cwe-hope-you-sign-up\u201d approach. So far, the state has only about 200 participants, or fewer than 1% of those who are eligible, according to the committee report.<\/p>\n
But over in Oregon, the state\u2019s OregonSaves program counts 64,720 participants who have saved up $46.2 million, said Kasey Krifka, engagement director for the Oregon Treasury Savings Network.<\/p>\n
Oregon is the poster child for the movement. The state requires employers with five workers or more to enroll. Employees contribute to their own retirement accounts through automatic payroll deductions that default to 5% of their pay. (It\u2019s all adjustable for the worker, who can also put the stop deductions at any time.) Participants save an average of $117 a month and 70% stuck with the program. The program is now offered to all Oregonians with earned income.<\/p>\n
Not all employers have signed up, and there is a penalty \u2013 up to $100 per eligible employee. But the state is more focused on getting more people involved.<\/p>\n
Auto enrollment isn\u2019t a panacea, though. The Boston College report found that the three states with automatic enrollment also saw 30% to 40% of participants drop out. Possible explanations are that the employees moved on to other companies or the state had invalid contact information.<\/p>\n
However, the two thirds who stuck with the programs now have a retirement account. Early savers In Oregon have since saved $2,000 on average. One year in, Illinois has 42,000 funded accounts with $11 million saved. In less than a year, California has nearly 4,000 accounts with $1.4 million saved.<\/p>\n
What the plan could look like<\/div>\n
Details of Colorado\u2019s plan won\u2019t be solid until a bill is passed and a new committee is formed to create the rules. But after nearly a year\u2019s worth of research, the Colorado Secure Savings Plan Board had several recommendations for a Colorado Auto IRA program:<\/p>\n
Require automatic payroll deductions for employees, starting with 5% sent to their retirement account. Workers can adjust their contribution or opt out.<\/em>Provide a low-risk investment portfolio, plus target date funds so workers can easily pick a plan based on their age.<\/em>Limit fees to 1%. Fees would pay the administrator to run the program.<\/em>Exempt employers who already offer a retirement plan or employ five or fewer workers. Government is also excluded.<\/em>Require employers to provide information about the program to workers, execute payroll deductions and add new employees to the program as they become eligible. <\/em>Employers are not plan sponsors so they are not fiduciaries or responsible for monitoring the plans. They also won\u2019t be required to contribute to employee plans. <\/em>Make the account portable so a worker who leaves a company can take the account with them. <\/em>Offer opt-in to the program for contract workers, self-employed workers or any other employee not covered by an employer\u2019s retirement plan.<\/em>Include a financial education component.<\/em>Ensure program is cash-flow positive within five years.<\/em>Start the plan within 24 months of passing the bill. <\/em><\/p>\nThe Colorado Sun is a reader-supported, journalist-owned news outlet exploring issues of statewide interest. Sign up for a newsletter and read more at coloradosun.com<\/a>.<\/em><\/p>\nRequire automatic payroll deductions for employees, starting with 5% sent to their retirement account. Workers can adjust their contribution or opt out.<\/em>Provide a low-risk investment portfolio, plus target date funds so workers can easily pick a plan based on their age.<\/em>Limit fees to 1%. Fees would pay the administrator to run the program.<\/em>Exempt employers who already offer a retirement plan or employ five or fewer workers. Government is also excluded.<\/em>Require employers to provide information about the program to workers, execute payroll deductions and add new employees to the program as they become eligible. <\/em>Employers are not plan sponsors so they are not fiduciaries or responsible for monitoring the plans. They also won\u2019t be required to contribute to employee plans. <\/em>Make the account portable so a worker who leaves a company can take the account with them. <\/em>Offer opt-in to the program for contract workers, self-employed workers or any other employee not covered by an employer\u2019s retirement plan.<\/em>Include a financial education component.<\/em>Ensure program is cash-flow positive within five years.<\/em>Start the plan within 24 months of passing the bill. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"to prepare adults for retirement, offset costs of aging population<\/p>\n","protected":false},"author":1,"featured_media":66082,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"tags":[28],"naviga_topic":[],"class_list":["post-66081","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","tag-headlines"],"acf":[],"author_name":"dh_admin","_links":{"self":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/66081","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/comments?post=66081"}],"version-history":[{"count":0,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/posts\/66081\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media\/66082"}],"wp:attachment":[{"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/media?parent=66081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/categories?post=66081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/tags?post=66081"},{"taxonomy":"naviga_topic","embeddable":true,"href":"https:\/\/dh.durangoherald.com\/tj\/wp-json\/wp\/v2\/naviga_topic?post=66081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}