silhouette of a rancher leaning on a fence

Colorado should protect retirement savers, not tax them

Edmund F Murphy - Empower Retirement President and CEO

Edmund F. Murphy III

President and Chief Executive Officer
May 26, 2021
Ed Murphy Blog

The Colorado legislature is considering a new tax on workers and retirees that needs some reconsideration before it becomes law.

The bill under consideration, HB21-1312, seeks to impose a premium tax on retail – or nonqualified – annuity and annuity-like products. 

These products can offer credited interest and annuity payout guarantees.  These guarantees are key tools of retirement planning for Americans of all stripes. A tax on the wealthy this is not: The average annuity owner of the sort who would be taxed makes $70,000 a year according to the American Council on Life Insurance (ACLI).

These important guarantees can only be provided in the private sector by insurance companies. 

This proposal would rightly exempt the application of the premium tax on products in tax-qualified accounts, such as employer-sponsored retirement plans like 401(k)s and traditional IRAs. However, if an individual isn’t fortunate enough to be saving through a pension or a workplace plan, the proposed tax is squarely aimed at their future retirement money.

The bill being considered would adversely affect Colorado annuity consumers saving for retirement regardless of their job, age or economic standing. This includes small business owners and the self-employed, so-called “gig workers” and independent contractors. These workers are most likely to lack an employer-provided retirement plan.

The tax also would hit Colorado’s farmers and ranchers, who often fund their retirements through taxable nonqualified annuity products from proceeds when they sell their farms or ranches. According to the ACLI, this proposal would unfairly subject Colorado farmers and ranchers to a second round of taxation if they were to seek the guaranteed income stream of an annuity. 

Does the legislature need to add a new burden for the farmers and ranchers who feed the rest of us?

These products can provide consumers an array of beneficial features, from guaranteed credited interest rates to guaranteed income for life.   

If the tax is imposed on these products, it would increase the cost for these products. This increased cost then would make these products too expensive for insurers to offer or would be passed to consumers. 

In a low-interest-rate environment, a tax on annuities for those who depend on them would add unnecessary pain for many retirees.

As workers and businesses begin the recovery process from the COVID-19 pandemic, now is not the time to create additional financial burdens on some of Colorado’s retirement savers. Why should those who don’t have the benefit of tax-sheltered plans be harmed as they try to save for retirement?

The Colorado legislature should be supporting Colorado workers. This unfair tax on retirement is bad policy.

At a time when so many are struggling financially, this tax would make it harder and more expensive for some Coloradoans to save for retirement.

Legislators should protect people working to secure their financial future and reconsider this proposal.



Latest Insights

A hammer, hardhat and gloves rest on top of an American flag - Labor Day 2021
Sep 2, 2021
Ed Murphy Blog

Work worth doing

At Empower, it’s our mission to serve working Americans. This is why we exist. 

Carefully consider the investment option’s objectives, risks, fees and expenses. Contact Empower for a prospectus, summary prospectus for SEC-registered products or disclosure document for unregistered products, if available, containing this information. Read each carefully before investing.

Securities, when presented, are offered and/or distributed by Empower Financial Services, Inc., Member FINRA/SIPC. EFSI is an affiliate of Empower Retirement, LLC; Empower Funds, Inc.; and registered investment adviser, Empower Advisory Group, LLC. This material is for informational purposes only and is not intended to provide investment, legal or tax recommendations or advice.  

IMPORTANT: The projections, or other information generated on the website by the investment analysis tool regarding the likelihood of various investment outcomes, are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The results may vary with each use and over time.

Investing involves risk, including possible loss of principal.

Insurance products are issues by or offered through Empower Annuity Insurance Company of America, Corporate Headquarters: Greenwood Village, CO; or in New York, by Empower Life & Annuity Insurance Company of New York, Home Office: New York, NY. 

The managed account service is part of the Empower Advisory Services suite of services offered by Empower Advisory Group, LLC, a registered investment adviser.

The Empower Institute is a research group within Empower.

“EMPOWER” and all associated logos, and product names are trademarks of Empower Annuity Insurance Company of America.

All features may not currently be available and are subject to change without notice. ©2022 Empower Retirement, LLC. All rights reserved.

Unless otherwise noted: Not a Deposit | Not FDIC Insured | Not Bank Guaranteed | Funds May Lose Value | Not Insured by Any Federal Government Agency.