A new law in Colorado requires many small business owners to offer employees an individual retirement account (IRA) opportunity funded by automatic payroll deductions.
The law established the Colorado Secure Savings Program in July 2020. It affects businesses with at least five employees.
According to a blog post in Paychex Worx, businesses that currently do not offer a retirement savings plan are now required to do so through the Colorado state treasurer and under the guidance of an advisory board. The plan is to implement the program by the middle of 2021.
Which employers need to take action?
The Paychex Worx blog post says employers must implement the Colorado Secure Savings Program for their employees if they have the following:
Five or more employees at anytime during the calendar year
Been in business at least two years, and
Not offered a qualified retirement plan in the preceding two years
There is a phased rollout for employers, beginning with businesses that have 100 or more employees. Businesses have to start enrolling employees in an IRA plan within two years of the date the Board is authorized to begin implementing the program.
Employers can face a penalty for noncompliance such as failure to enroll eligible employees,. There will be a fine of $100 per eligible employee per year (up to a maximum penalty of $5,000 annually).
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