A New Colorado Program Can Help Small Businesses And Workers Lessen The Wealth Gap

A new law in Colorado will provide an automatic retirement savings program to small businesses across the state, giving more retirement security to nearly a million workers. In a time when Covid-19 and systematic racism have highlighted disparities in wealth and financial stability, this could be something for business leaders, policymakers and advocates to watch. 

Small businesses have a proven track record of bringing jobs and wealth to all communities—especially ones of color. Putting a program in place that helps small business owners and workers plan for retirement is the sort of innovation we need from the government right now. Intrigued? Here is some background and how it works. 

In essence, businesses with five or more workers who do not have retirement savings programs will offer access to automatic payroll deductions in an Individual Retirement Account (IRA), which is a public-private partnership administered by the state and managed by the private sector. This program is a portable benefit, allowing workers to take their accounts with them when they leave a job or roll them into an employer-sponsored account. 

Gov. Jared Polis and the Colorado General Assembly have built upon the work of states like Oregon, California, Illinois and New Mexico, and this program could very well be a model for more states to follow. Retirement security is the foundation of financial security but it is an enormous challenge for working families in our country. Many people work for small businesses that aren’t able to offer the retirement options that large companies can. Retirement programs like Colorado’s can put many workers on a path to saving earlier in life, while bolstering small businesses and creating a more financially resilient workforce. 

According to a recent Pew study, many small businesses, especially those with 10 or fewer employees, are unable to afford the costs and administrative burdens that come with private retirement security plans. State-facilitated programs enable businesses to offer access to them for free with simplified administrative operations for already overtaxed small business owners. They also help small businesses recruit and retain top quality talent that may leave due to the lack of retirement benefits, thus helping level the playing field between large and small employers.

The bottom line is that these retirement savings programs are showing positive returns. In Oregon, California and Illinois, they have enrolled over 150,000 employees who have accumulated more than $90 million dollars in collective assets. Another Pew study found that 79% of business owners in Oregon’s program said they did not experience any related out-of-pocket costs. 

In the end, all boats can rise from public-private retirement programs. More Americans putting money away for retirement increases their  financial resilience and is vital in creating a more equitable workforce. It’s time for states to give all employees the assistance in putting money away for retirement that so many of us take for granted.

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