Business/Technology Reporter
Quick links: Who’s saving? | Growth in 401(k)s| The missing 45,000 and future of Colorado’s SecureSavings | Poll: Are you ready to retire? | Other: GlobalMindED, rural business loans
One year after Colorado rolled out a novel retirement program for workers whose employers didn’t offer one, nearly 55,000 workers have opened an account and started setting aside part of their paycheck.
Workers have stashed away more than $50 million at an average of $978 per person. And the numbers are growing, said Dave Young, the Colorado State Treasurer, whose office oversees the Colorado SecureSavings program. Another 45,000 users are in flux, which could double the number of accounts by the end of the year. And there are thousands of employers who haven’t complied yet with the state mandate to provide a private retirement plan to workers or join the state-facilitated one.
That may be a far cry from the nearly 1 million Colorado workers originally estimated to have no access to a retirement plan at work. But it’s still relatively early. As the program, which launched in January 2023, notified 85,000 employers thought to be eligible last year, that count dwindled.
One big reason? Many companies added their own 401(k) plan instead of joining the state’s program. SecureSavings, initiated with the passage of Senate Bill 173 in 2019, requires employers to enroll staff and set up an auto-deduction from their paychecks (workers can opt out within 30 days). As of today, about 14,300 employers have enrolled. Another 26,000 verified they already offered retirement benefits to their workers.
“At the end of the day, I’ve consistently said our goal is more savers,” Young said. “We know what the threat is by placing people into this vice where they don’t have supplementary savings to work alongside Social Security. We’re excited about the program’s increase but we’re also excited that there’s generally more people saving.”
Who is saving up for retirement?
Demographic data isn’t available just yet about savers who hadn’t set up retirement accounts before the launch of SecureSavings.
But based on how many accounts have picked investments portfolios with target-end dates decades away, half are under the age of 40, Young said.
However that stat means that half are over 40. And that’s been a national concern. As company pension plans were replaced by 401(k)s in the past 45 years, many companies left it up to workers to fend for themselves. And millions of private-sector employees lack access to one today, according to a recent New York Times report titled “Was the 401(k) a mistake?”
According to the U.S. Census, 49% of adults age 55 to 66 had no personal retirement savings in 2017. It’s unclear how many Coloradans over 55 have a retirement account, but AARP still puts the number at around 31%. While Social Security benefits were paid to 805,068 Coloradans 65 and older as of December, the State Demographer’s Office estimates that there’s about 923,000 Coloradans today who are 65 and older.
“More than 31% of workers 55-64 have no retirement plan and that is frightening,” AARP Colorado spokesperson Angela Cortez said in an email. “It’s even higher for Black and Hispanic Coloradans, more than 40% and 60% respectively.”
But what we do know about the state’s SecureSavings participants is that lower-income folks are signing on at higher rates than other income groups, Young said. That supports early theories about who lacked access to retirement plans.
“They were typically coming from underserved communities. They were people who worked in low- to moderate-income jobs, and typically were employed by smaller businesses,” Young said.
That’s true of the data Gusto gleaned from its small business customers who opted to start their own 401(k) plans last year.
The company, which provides HR and payroll benefits services to small businesses, tracked retirement plans of its 300,000 customers and found that the greatest increases in 401(k) participants between July 2022 and 2023 were companies with 5 to 9 employees and workers earning $15,000 to $25,000 annually.
Smaller businesses had less participation to start with, as did workers who earned the least income. So there was a lot of room for growth. But without the state-mandated plans, those workers probably wouldn’t be saving for retirement.
“Importantly, the largest effects of these mandates are seen among low-income workers. In Colorado, rates of 401(k) enrollment have nearly doubled across low-income workers at firms subject to the mandate,” the Gusto analysis shows.
Gusto also pointed out past data showing that offering retirement plans has helped small business owners reduce employee attrition by 40% over one year.
There’s still a lot of businesses out there that need to enroll in the program or verify they have a plan of their own. But over at small business advocate NFIB Colorado, which was concerned about the retirement plan when it was proposed, state director Tony Gagliardi said he hasn’t received any pushback from members. The organization connected members to state officials when the program was ramping up.
“The most I heard from my members was where and how do they sign up,” Gagliardi said in an email.
Why thousands of firms added private 401(k) plans instead
Between June 2022 and 2023, the share of Gusto’s Colorado companies with 401(k) plans increased 50% — to 38% from 25.3%. The jump was credited to the June 30 state deadline that local companies with five or more employees had to register in the state’s plan or adopt their own.
But the move to private plans wasn’t necessarily because companies didn’t want to join the state plan and were likely already thinking of starting one, said Liz Wilke, principal economist at Gusto.
“Those that complied with the mandate weren’t necessarily unwilling to offer 401(k), they just delayed taking action, and the mandate forced the action,” Wilke said in an email.
Colorado’s plan does have limits. Employers aren’t allowed to provide a matching contribution because employers are only a facilitator. It’s not a traditional 401(k) plan because employers don’t manage them nor does it have tax-deferred benefits. It’s a Roth IRA so a worker’s contribution is after taxes have been taken out. And while there is no fee for employers to join, they’ve got to invest time and working hours to enroll workers and set up the payroll deduction.
“Additionally,” she said, “it is very easy for an employer to enroll in the CO plan. Yet, despite this, we still see them opting for 401(k)s at a higher rate likely due to the ease of integration and cost effective options designed for small businesses. One of the benefits of doing this as an add-on to payroll service is that the administration is taken care of by the third-party provider and does not fall on the employer.”
More challenges, more potential
Another 45,000 workers are in some sort of waiting period, such as the 30 days they’re allowed to opt out, or getting pass the federally required “Know your customer” identity verification for financial institutions, which is aimed at cutting down on financial theft and fraud.
That could be an issue for workers without a home address or prior bank relationship. But it could also be the start of getting the consumer on a better financial path, said Andrea Kuwik, director of policy and research at The Bell Policy Center, a progressive nonprofit in Denver that advocates for economic mobility. Working alongside other state agencies like the Office of Financial Empowerment, SecureSavings could empower folks financially.
“Working to increase the financial access for folks who may not have a bank account or access to good credit, etc, … that potential collaboration in the future could be incredibly valuable to help address some of those problems,” she said.
There’s also a chunk of employers that have enrolled workers but haven’t set up the payroll contribution to send to the state plan.
That means workers may be enrolled but haven’t been able to contribute money to their new retirement account.
Some 42,000 employers haven’t registered, according to the program’s annual report released last month. Young said some of those companies are still being vetted through department of labor data. Some of the original 85,000 believed eligible for SecureSavings don’t exist anymore or have fewer than five employees so they are exempt. It’s been challenging to contact some of the companies to let them know they’re out of compliance because their contact is an accounting firm or other agency that didn’t understand they needed to respond to the letters.
“We’re in the process of figuring out a way to go directly to the business,” Young said. “We’re also in the process of (contacting) businesses that haven’t actually run payroll for their employees. … It wasn’t enough just to enroll your employees into this. We’re making those kinds of outreaches as well and because of that, you’re going to see these numbers grow.”
Another impact of the state’s retirement offering? It’s helping other smaller states offer their own plans. Maine struggled as a small state to find the resources to put its own program together until it partnered with Colorado and used our template and vetted service providers like program administrator Vestwell. Two months later, Maine had a pilot program, Young said.
“They went from a two-year stagnated situation to a very rapid launch. And the reason is because they use our record-keeper, our fund managers and are able to use our fee structure,” Young said. “The same thing is happening now in Delaware. They’ve launched their pilot. … And why does this help Colorado? Well, we wrote contracts with our fund managers that the more money that they are managing for our savers, we get price breaks. … Not only does this help the smaller states launch, but it brings the fees down and helps our savers have lower fees as well.”
➔ EARLIER: Colorado retirement plan launches for those without one, including self-employed, gig and farm workers. >> Read
➔ More: Colorado SecureSavings home
Poll: Have you saved enough for retirement?
We’re curious where What’s Working readers are at with this thing called retirement. Have you saved enough? Or have you not even started? Take our poll to help us report on Colorado >> cosun.co/WWretire
** Hello friend! **
▼▼ Here’s an opportunity to help support stories like this one. ▼▼
Sun economy stories you may have missed
➔ “Shame on Polis”: Why the Colorado labor movement is so mad at the governor. Jared Polis vetoed six bills last week, three of which were priorities for state union leaders >> Read story
➔ The cost of gas is about to spike in Colorado. How high will it go? The EPA is forcing Colorado to switch to reformulated gas as ground-level ozone hits “severe” during the summer >> Read story
➔ $6.8 million upgrade to century-old ditch unites agricultural, environmental interests on the Yampa River. The antiquated ditch near Maybell is the largest agricultural diverter on the Yampa River. Fixing it took years of work by unlikely bedfellows to help farmers, floaters and fish on the Yampa River. >> Read story
➔ Concentration of real estate agents in Colorado Springs is 3 times higher than the national rate. As the area had its worst April in years for homes sold, the number of real estate agents is in decline. Those who remain stick with what works: cultivating relationships. >> Read story
➔ Big companies like to buy Colorado’s thriving outdoor businesses — and then move them out of state. As Colorado’s outdoor recreation industry matures and draws investment, part of that growth includes reshuffling, consolidation and new corporate strategies that can pull thriving businesses out of the state. >> Read story
➔ When Colorado’s new law banning cellphone use while driving goes into effect — and when it can lead to a traffic stop. Senate Bill 65, which Gov. Jared Polis says he will sign, will enact fines and license points for violators >> Read story
Other working bits
➔ When college just isn’t enough, there’s GlobalMindED. If you’ve discovered that a college degree isn’t enough to get you where you want to be in a career, the missing component could be the lack of networking connections. And Denver-based GlobalMindED, whose mission is to close the equity gap, has them. It’s built a network of connections to role models, mentors and folks with internships interested in giving low-income and first-gen college students that first job or start of a career. The organization is hosting its 10th anniversary leadership conference June 17-19 in Denver and welcomes those interested in inclusive leadership. >> Details
➔ Program expands for women-led firms in rural areas. Alamosa-based First Southwest Community Fund is adding new educational programs to help women business owners get access to grants and low-interest loans of $10,000 to $75,000. Called the Rural Women-Led Business Fund, sessions are virtual programs connecting business owners with local professionals and mentors and aim to provide more capital to women, especially women of color in rural Colorado. FWCF was created by First Southwest Bank in 2015 to better serve the southern part of the state. >> Details
➔ Colorado Springs Airport sets April record. Business continues to pick up at the Colorado Springs Airport, which saw a 15.4% increase in passengers to 194,004 last month, compared to April 2023. That bodes well for expanding airlines, which includes American Airlines adding a sixth nonstop flight to Dallas this month, Delta Air lines adding a second daily nonstop service to Atlanta in July and more. >> Details
Got some economic news or business bits Coloradans should know? Tell us: cosun.co/heyww
Thanks for sticking with me for this week’s report. Remember to check out The Sun’s daily coverage online. As always, share your 2 cents on how the economy is keeping you down or helping you up at cosun.co/heyww. ~ tamara
Updated June 4, 2024: This story was updated to remove CO Saves as a nickname for the SecureSavings plan.
Miss a column? Catch up:
What’s Working is a Colorado Sun column about surviving in today’s economy. Email tamara@coloradosun.com with stories, tips or questions. Read the archive, ask a question at cosun.co/heyww and don’t miss the next one by signing up at coloradosun.com/getww.
Support this free newsletter and become a Colorado Sun member: coloradosun.com/join
Corrections & Clarifications
Notice something wrong? The Colorado Sun has an ethical responsibility to fix all factual errors. Request a correction by emailing corrections@coloradosun.com.