Colorado has moved a step closer to instituting a state-sponsored auto-IRA program for private-sector workers.
On Monday, a group of state senators and representatives introduced a bill that would establish the individual retirement account system. That follows a recommendation from the state’s new secure savings plan board, which was created by the Colorado legislature last year to examine how a lack of retirement savings financially affects the state. The board was also tasked with evaluating different ways to improve retirement savings for Coloradans.
“The board found that a state-facilitated automatic enrollment individual retirement account program is the best option for Colorado and recommended the establishment of such a program, coupled with the greater use of financial education tools in the state,” the state’s general assembly wrote in an announcement of the new bill.
The program would automatically enroll most workers in the state who do not already have retirement savings accounts, though workers would be able to opt out, according to the bill.
A number of other states and cities have added public savings options for private sector workers over the past several years, doing so largely in response to the lack of a federal auto-IRA program.
There are currently 12 state programs that have been enacted or are up and running across the country, including auto-IRA systems in California, Connecticut, Illinois, Maryland, New Jersey, Oregon and the city of Seattle, according to data from the Center for Retirement Initiatives at Georgetown University. Other programs included in that count include state-sponsored IRA marketplaces and multiple-employer plans.
On Tuesday, California won a legal challenge to its CalSavers auto-IRA program, which a conservative tax group had claimed was preempted by the Employee Retirement Income Security Act.
Oregon, which in 2017 launched the first auto-IRA program, has enrolled about 64,000 workers, and total assets in the system are about $46 million, according to OregonSaves.
In Colorado, about 900,000 workers, or roughly 40% of the workforce, do not have access to employer-sponsored retirement plans, according to the bill introduced this week. The lack of coverage disproportionately affects young, low-income and minority workers, the bill noted.
“The future of Colorado’s economic growth relies on our aging population having sufficient income in retirement so they can afford to live independently and have quality healthcare,” the text of the bill read. “The cost of insufficient retirement savings to the state is estimated to be close to $10 billion over the next 15 years.”
The proposed auto-IRA program would become self-sustaining, from a cost perspective, within five years, according to the bill.
The bill would direct the state treasurer’s office to hire a staff to oversee and administer the program.