Auto-IRA bill awaits governor's signature in Colorado

Colorado is set to become the latest state with a public retirement savings program for private-sector workers.

Over the weekend, the state legislature passed a bill to implement the Colorado Secure Savings Program. That bill now awaits a signature from Democratic Gov. Jared Polis.

The state would be the ninth to establish an auto-IRA-style program that requires businesses to register employees for retirement accounts, though workers are able to opt out.

Oregon, California and Illinois were the first states to implement “secure choice” auto-IRA programs, which have similar designs. OregonSaves, which is about three years old, now has more than $50 million among more than 68,000 accounts, according to an announcement earlier this year from that program.

California’s CalSavers program officially launched last year and as of Sept. 30 will require business with 100 or more employees to register, unless they already provide retirement plans for their workers. The program has a phased rollout, with deadlines extending through 2022 for smaller businesses.

The Illinois Secure Choice program is about a year and a half old and requires all business with at least 25 employees to register, unless they already have plans in place.

Colorado’s forthcoming program will eventually apply to businesses with as few as five employees, according to the text of the bill passed Saturday.

The program will operate at least in part with grant funding, though it is expected to become self-sustaining within five years, the bill said. The state would hire five full-time employees to oversee the program.

Although the first auto-IRA programs have touted high demand, the COVID-19 crisis will likely slow down contributions, particularly because of the outsize effect the pandemic has had on small businesses. Earlier this year, administrators of several of the state programs said that the crisis won't affect the long-term viability of the savings plans, however.

Auto-IRA programs such as Colorado’s are necessary because of the vast disparity in retirement security that exists across income levels and racial identity, according to the legislation.

“Nearly half of all families in the United States have no retirement assets. Even among those families who are nearing retirement, four out of 10 have no retirement assets,” the bill read. “Middle-class, working-age families whose incomes are at the 50th percentile have, on average, only $5,000 saved in retirement accounts.”

Further, “most African-American and Latinx families have no retirement savings. About four out of 10 African-American families and one out of four Latinx families have retirement savings,” the bill read. “The median white family with retirement savings has over three times as much saved as the median African-American or median Latinx family.”

Colorado passed a law last year to establish a board that would study possible ways to address retirement savings shortfalls, including an auto-IRA system, increased financial education and a retirement-savings “marketplace” overseen by the state.

The board recommended the legislature move forward with the auto-IRA program and consider measures to improve financial education in the state.