Colorado Treasurer Dave Young laid out the roadmap for the state’s new Secure Savings Plan, which he said will take at least two years to get up and running, but could save taxpayers $10 billion over the long haul by boosting the retirement assets of workers in the state.
“We are very sensitive to the challenges that businesses face in the current economic crisis. We want to do this in a thoughtful way,” Young said during a video call Tuesday.
The first major milestone comes Sept. 15, when Gov. Jared Polis will replace the current study board with an operating board, which Young will also chair. Those interested in serving on the board can contact Leah Marvin-Riley in the Treasurer’s Office. The new board will then appoint an executive director to run the program.
The board and new executive director will issue requests for proposals to find private firms to administer the plan and manage the money collected.
“We want to make sure we select the right entities for managing the program,” Young said, noting that those two outside vendors will carry the “heavy load” of the program.
Following the advice of Oregon’s Treasurer, Colorado will implement the program in waves. Oregon had six waves, starting with the largest small businesses. Young said that in hindsight was excessive. Colorado will likely roll out a plan in three waves, with financial support available to cover added payroll costs for the smallest employers.
Businesses that are new — younger than 2 years old — or with fewer than five employees will be exempt. So will all employers who currently offer a retirement plan.
More than 900,000 workers in Colorado lack access to a retirement plan at work, and while they in theory could set up an IRA account on their own, few are doing so, according to supporters of the new program.
“There are huge barriers to offering these types of plans. Administration is expensive for small businesses,” said state Sen. Brittany Pettersen, D-Lakewood, who also was on the call.
Young workers in particular stand to see the greatest benefit. Pettersen said about half of millennials lack access to a retirement plan at work or have minimal retirement savings, a shortfall that is more severe among young women and people of color. But younger workers also have more time to see their assets appreciate, provided they start saving.
“Millennials are more likely to have numerous careers over their lifetimes. This is a great option for us,” said Pettersen, who co-sponsored the bill that authorized the program.
Employees in the plan will have 5% of their pay automatically deducted and diverted to a Roth IRA account. They can adjust that share up or down, including going to zero. Financial education will be another important component of the program, Young said. And the plans are portable, meaning workers can take them from job to job.
Young said a study the board commissioned estimated the state would have to spend $10 billion in social assistance to support underfunded retirees over 15 years if it did nothing. Rather than drawing on state support, workers in the plan would draw down their accumulated assets in retirement and contribute to state and local tax revenues.
“When they (workers) are sustainable in retirement, they are paying taxes on their retirement savings, lessening the load on other taxpayers,” he said.
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