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CCH® PAYROLL — 03/12/10

Colorado to allow wage deductions for automatic enrollment

Colorado has enacted legislation to allow wage deductions for contributions attributable to automatic enrollment in an employee retirement plan, regardless of whether the plan is subject to the federal "Employee Retirement Income Security Act of 1974," as amended. The law also provides that employers would not be liable for the investment decisions made by the employer, if certain conditions are met. Employee retirement plans include deferred compensation plans (Code Sec. 401(k) or Code Sec. 403(b)), governmental deferred compensation plans (Code Sec. 457), and payroll deduction individual retirement account plans (Code Sec. 408 or Code Sec. 408A) of the federal Internal Revenue Code. This legislation is scheduled to take effect January 1, 2011, unless a petition is filed against it. Should a petition be filed within 90 days of adjournment of the state legislature (May 12 is the adjournment deadline), then the act would go before voters in the November 2010 General Election.

Senate Bill 35 provides that an employer would not be liable for the investment decisions made by the employer on behalf of any participating employee with respect to default investment of contributions made for the employee, if the following conditions apply:

• The plan must allow participating employees to select investments for contributions among the alternatives available on at least a quarterly basis.

• Employees must be given notice of the investment decisions that will be made in the absence of the employee's direction, along with a description of all investment alternatives available and a brief description of the procedures available for the employee to make changes to the investments.

• Employees must be given at least annual notice of the actual default investment decisions on behalf of participating employees.

(Colorado Senate Bill 35, L. 2010).

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