Mastering Compliance: Boulder Chamber 401(k) Program Webinar

1 What is the Colorado SecureSavings Program?

On Todays Call

The purpose of this webinar is to provide an initial resource regarding the implementation of the Colorado SecureSavings Program as well as on going information and updates during the rollout period.

2 What are the compliance requirements?

3 What other options are there?

4 Comparative analysis

5 Who can I turn to for help?

What is the Colorado SecureSavings Program?

COLORADO SECURESAVINGS PROGRAM

State Plan Overview

• In Colorado, more than 40% of the private-sector workforce has no access to a retirement savings plan at work. Colorado SecureSavings was created to meet this need for nearly one million workers.

• With Colorado SecureSavings, businesses can help their employees save for retirement in a portable Roth Individual Retirement Account (IRA).

• Colorado SecureSavings requires participation from all Colorado businesses that meet the following criteria:

– Businesses registered to conduct business in the state of Colorado that have been operating for two or more years.

– Businesses with 5 or more employees who have worked for at least 180 days.

– Businesses that do not currently offer a qualified retirement savings plan to employees. (401(k), 403(b), SIMPLE, SEP, 457(b))

– Colorado businesses must register with the state based on their employee count as indicated below.

• 50+ Employees: March 15, 2023

• 15-49 employees: May 15, 2023

• 5-14 employees: June 30, 2023. • Penalties: Employers who do not participate in the state program, fail to have a

Secure 2.0 has an impact in the decision

• December 27, 2022, Congress enacted the Secure Act 2.0 which has far reaching implications for employers setting up a retirement plan. The act passed with bipartisan support and is viewed by both parties as positive legislation to assist business owners in providing retirement benefits to their employees. There were 94 provisions regarding employer retirement plans, but today we will touch on just a few.

• New Plan Start up Credits. Prior to the passage of this act, business owners could receive a tax credit for 50% of the cost of setting up and administering a plan for their employees, ranging from $500 to $5,000 annually. Additionally, this credit is limited to $250 per non highly compensated employee participating. With the passage of 2.0, the start up credit has increased to 100% of the cost of set up and administration for the first three years. This credit is available to employers with 50 or fewer employees.

• A new credit was also added to the legislation which provides employers with an additional tax credit to offset some of the expense of employer contributions to qualified plans. Employers can receive a tax credit for the lesser of $1,000 or 100% of the employer contributions given to employees making $100,000 or less annually, in the first two years of the plan. The credit tiers down 25% annually for years 3-5. This credit is also available for employers with 50 or fewer employees.

• There are obviously a number of other provisions and credits in the federal legislation, but these two coincide with the state mandate to provide a plan. These credits allow employers to provide a significantly enhanced retirement benefit to their employees while being

COLORADO SECURESAVINGS PROGRAM

What does the State Plan Offer?

• The Colorado SecureSavings program is a Roth IRA with Auto-Enrollment & AutoEscalation. Default enrollment begins at 5% of income and increases by 1% each year up to 8% of income. Participants can opt out, recharacterize as pre-tax contributions, or elect a different amount or percentage.

• Employees should be automatically enrolled within 30 days of the initial business registration, or within 180 days of hire.

• Employer contributions are not allowed, this is an elective deferral only Plan.

• When an employee is automatically enrolled, their funds will be invested in the Capital Preservation option. After 30 days, the employee’s funds will be exchanged automatically to a default Target Retirement Date option based on their date of birth.

• There is no cost to the employer to set up or operate the plan. Employees are charged a base fee of $22 per year. They also pay 5 bps of their assets to the state of Colorado and 15 bps of their assets to the record keeper of the IRA. Finally, there are underlying asset charges ranging from 2.5 – 12 bps depending on the investment selection. These asset charges pay for the administration of the IRA and administration of the funds.

What are the Compliance requirements of the Program?

COLORADO SECURESAVINGS PROGRAM

What does the business owner need to do?

• The business must register with the state of Colorado when notified.

– The State will notify employers of the need to register approximately thirty days prior to the registration deadline.

– Registration notifications are expected to be sent: February 15 for employers with 50+ employees, April 15 for employers with 15-49 employees, and May 30 for employers with 5-14 employees.

• When registering, the Employer will need the following:

– The company’s EIN and unique Access Code (which will be sent via mail or email).

– The Payroll provider’s name (if outsourced) and the company’s payroll schedule(s).

– The company’s bank information for payments.

– The latest employee roster and accompanying personal information in an uploadable CSV format.

• Each payroll, employer’s will need to update the employee roster by adding new hires and employees who opt in later, as well as employees who reach the age of eligibility. Employers will need to maintain records of each employee’s deferral elections and deferral election changes.

• Each Payroll, the employer will upload the current payroll information with the participating employee's information to the Colorado Secure Savings Portal for electronic contribution to the plan.

What if the Colorado SecureSavings program requirements

are not met?

• Colorado Business’s must comply with the Colorado SecureSavings Program, or they are subject to penalties to be assessed by the state. Companies can comply by:

– Registering and Enrolling in the program as just described earlier in this presentation

– Registering and certifying they are exempt from the requirements based on the fact that they already have a qualified plan in place, or the program does not apply to them for other reasons. It has been discussed that employers with 5500’s filed for their company plans will not be sent registration information, but I would caution employers to be alert for notification in the event that the 5500 was not found or not applied to their business.

– Registering and requesting exemption from the program requirements due to a qualified plan being put in place for the 2023 year.

The Colorado SecureSavings Program website states that Employers who do not participate, fail to have a qualified exemption, or fail to enroll employees, can be penalized up to $100 per eligible employee per year, capped at $5,000/year.

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While there have been discussion that the penalties will not be enforced until February of 2024, the website states that registration must occur by the schedule referred to earlier, and the automatic enrollment must commence by 30 days after registration.

- On the other side of the coin, the state website does not currently speak to employers who are setting up a plan for the 2023 year, but do not have a plan in place as of the registration deadline. Consensus is that there will be a period of time to complete plan implementation, but this is not addressed on the

Am

I required to utilize the program or are there other options?

Saving Incentive Match Plans and Simplified Employer Pensions

• SIMPLE’s • IRA plans with employee contributions and Employer matching or non elective contributions.

• SEP’s • IRA plans with employer contributions only.

• Allow for Pretax and with SECURE 2.0 Roth contributions.

• Low cost plans that qualify for exemption from the State Program. There is discussion that the plans may not be considered qualified for exemption after review, since there is no elective deferral feature.

• Low cost plans that qualify for exemption from the State Program.

Restricted Investment choices with somewhat more expensive funds.

Lower Contribution Limits and no Profit Sharing functionality.

Restricted Investment choices with somewhat more expensive funds.

No Employee deferrals allowed.

Prorata Profit Sharing limited to 25% of eligible compensation.

COLORADO SECURESAVINGS PROGRAM TRADITIONAL ALTERNATIVES

401(k), 403(b), 457(b)

• Employee Contributions

• Allow for elective deferrals to be made in either Pretax or Roth sources.

• Employer Contributions

• Safe harbor plan designs to ensure benefits for highly compensated employees.

• High 402(g) elective deferral limits and High Catch up Limits.

• Traditional Plan designs to manage costs and to reach specific company goals.

• Flexible Eligibility rules to target employee benefits.

• Vesting Schedules used for Employee retention.

• Broad Investment Choices with Lower Expense Ratios.

• Targeted crosstested profit sharing to provide differing benefits for each employee (subject to discrimination testing).

Comparative Analysis

COMPARE YOUR OPTIONS

Here is a side by side review of the options

Who Can I Turn To For Help?

I am so happy at FuturePlan, to be able to partner with Investment Providers, Record Keepers and Financial professionals throughout the state of Colorado. Our goal is to work in tandem with our partners to provide you with the knowledge and perspective needed to navigate the state mandate and to make the bestinformed choices for your business and your clientele.