Changes to costs of employment and being a business owner in Colorado in 2023 and beyond
Over the past few years, the Colorado voters have approved changes that increase the costs of employment that both employees and business owners must bear. Beginning in 2023, these legislative changes are now being implemented and enforced here in Colorado. In this article we will discuss two of the legislative changes and who may be impacted. Please consult your tax professional, attorney, and/or financial advisor for information specific to your business.
Colorado SecureSavings Program
Like many Americans, many Coloradans are behind in their savings for retirement and may not have access to retirement savings plans through work. To address this issue, beginning in 2023, Colorado employers are required to participate in the Colorado SecureSavings Retirement Savings Program if they meet the parameters below:
- Your business is registered to conduct business in the state of Colorado
- You have at least five W-2 employees who have worked for you for at least 180 days
- You have been in business two or more years
- Your business does not currently have a retirement plan in place
Colorado businesses will need to either join the Colorado SecureSavings Program or implement their own employer-sponsored plan to satisfy the requirements of the legislation.
The goal of this plan is to provide employees access to a retirement plan to save more for retirement. This plan may be a good option for your business and your employees, or there may be better options separate from this state-run plan. It is important to discuss all potential options with your financial advisor to consider the pros and cons and make an informed decision.
For businesses that are already offering a qualified retirement plan like a 401(k), SIMPLE IRA or SEP IRA, you will not be required to add this state option. For businesses that do not currently have five or more employees or have been in business less than two years, you will still have the option to enroll but will not be required to do so.
Colorado Family and Medical Leave Insurance Program (FAMLI)
In 2023, employers and their employees are also responsible for funding the FAMLI program to provide access to paid leave in order to take care of themselves or their family during life circumstances that pull them away from their jobs – like growing their family or caring for a loved one with a serious health condition. Eligible employees will receive up to 12 weeks of leave, with benefits to employees beginning January 1, 2024.
There are specific participation and eligibility rules that should be discussed with a tax professional and attorney. General guidelines are below:
For employers with 10 or more employees, you are responsible for collecting the employee’s portion of the premium via payroll deduction and sending the full amount to the Division of Family and Medical Leave Insurance at the Colorado Department of Labor and Employment once per quarter.
Both employers and employees are responsible for funding the program and split the cost 50/50. Premiums are set to .90% of the employee’s wage, with .45% paid by the employer and .45% paid by the employee.
Employers with nine or fewer employees do not have to contribute to the program, but employees of these companies still need to remit their share of the premium payments (.45%) and the employers are responsible for implementing payroll deductions and submitting wage reports quarterly to the Division.
Employers who offer their own paid leave program may apply for an exemption.
What do these changes mean for my business and my employees?
Employers are being forced to implement these items to provide benefits for employees. These changes also have direct impacts on administrative burdens and costs that employers must bear, along with the unknown difficulties in managing future staffing and capacity issues if employees are out for extended periods of time.
These are the most recent examples of why financial planning with a focus on the business is critical to staying ahead of changes like these so that disruptions to the normal course of business operations are minimized. It is also important to be able to communicate these changes with employees so everyone is aware of the impacts these benefits have on their compensation and overall benefits packages.
We are available to assist you in finding the best solutions for your business and your employees. Please reach out with any questions to 303-665-2822.
For additional information please go to the FAQs in the Colorado SecureSavings website and the Colorado FAMLI program
https://coloradosecuresavings.com/
https://www.nirsonline.org/reports/retirementinsecurity2021/
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
