Colorado employers must make payroll deductions for two new programs beginning in January. They should prepare now by examining policies and procedures and consulting payroll vendors to ensure they follow state laws.
The first program is the Colorado Family and Medical Leave Insurance (FAMLI) program. I summarized the requirements for employers in a previous column in the Business Times available online at https://thebusinesstimes.com/all-in-the-famli-its-time-to-prepare-for-medical-leave-program. Except for local governments that have opted out of participation, all employers must begin withholding premiums from employees’ pay on Jan. 1. Employees must contribute 0.45 percent of their pay. Employers with more than nine employees must match that deduction.
Now’s the time to address two sensitive issues.
First, FAMLI is specific as to how local governments choose to opt out. This isn’t a decision an administrator or human resources director can make. Opting out requires a vote of the governing body before Jan. 1. Local governments must communicate that decision to the FAMLI division beforehand. Otherwise, local governments are bound to participate for at least 180 days before they may withdraw.
Second, employers that haven’t yet informed employees of FAMLI requirements should do so now. Employees on tight budgets will need as much time as possible to prepare for a decrease in disposable income. A full-time minimum wage employee will see a drop of about $118 per year. That isn’t a large amount for everyone, but could be for an employee working from paycheck to paycheck.
Another new program has received less notice than FAMLI. The Colorado Secure Savings Program establishes a new retirement savings program for private sector workers who don’t have access to workplace retirement savings plans.
The Colorado Secure Savings Program requires most private employers with at least five employees that don’t offer a tax-qualified retirement plan to enroll in the program by Jan 1. Under the proposed Secure Savings Program regulations that could become effective as early as the date this column goes to press, a tax-qualified retirement plan means “an employee benefit plan that is qualified under section 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b)” of the IRS Code.
An employer that offers no qualifying plan must enroll in the program through the online portal the state will activate later this year. ALL employees that choose not to enroll must certify they offer a tax-qualified plan, have less than five employees or have been in business less than two years. Of course, the exception for new employers only delays enrollment for otherwise covered employees.
During enrollment, covered employers must supply employee information specified in the regulations so the state may provide employees with information on the program. In turn, employees may allow an automatic 5 percent pay contribution to begin, designate a different contribution amount or opt out of the program within 30 days. In addition, contributions for account holders who participate in the program for at least six months will automatically increase by 1 percent of the account holder’s wages at the beginning of each subsequent calendar year, up to a maximum of 8 percent.
Employees should inform employees about the program now. Hearing about the program for the first time from the state is a guaranteed recipe for confusion and discontent. The Colorado Department of the Treasury provides a succinct fact sheet employers may share with their employees at https://treasury.colorado.gov/sites/treasury/files/CSSP_Fact%20Sheet_WorkerOutreach.pdf.
Self-employed persons and others who aren’t qualified employees — including those with less than six months of employment with an employer — may participate in the program voluntarily so long as the they meet the qualifications to open an Individual Retirement Account.
Special rules apply to employers who obtain employees from an employee leasing company. The employee leasing company’s employees are considered the employees of the worksite employer, and the worksite employer is responsible for program compliance. But the worksite employer may contract with the employee leasing company to perform all or part of the program obligations. Employers who use professional employer organizations, staffing companies or other third parties for their workforce needs should contact their staffing providers as soon as possible so both employers are ready to implement the program.
These two programs impose administrative burdens on employers that require careful advance preparation. Time is running out to make important decisions on implementing these programs. The Employers Council is ready to assist its members with this process.