What's Working: Nearly 55,000 Coloradans now have a retirement account after law went into effect
Quick links: Who's saving? | Growth in 401(k)s| The missing 45,000 and future of
One year after
Workers have stashed away more than
That may be a far cry from the nearly 1 million
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
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
"More than 31% of workers 55-64 have no retirement plan and that is frightening," AARP Colorado spokesperson
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
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
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
"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
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
"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.
"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
The 45,000 workers in the pipeline are in some sort of waiting period, be it the 30 days they're allowed to opt out, or getting past 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
"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.
"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
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