My former employer has told me that all vacation from the prior year (2005) is lost as of Jan 1. 2006 and therefore when quitting I am only owed for what was earned from the beginning of this year and nothing more. Does Colorado have and laws requiring vacation roll over from one year to another?

Not that I'm aware of. CO is one of the not-too-numerous states that requires any accrued but unused time you are holding at termination to be paid out, but if use-it-or-lose-it plans are illegal there, it's the first I've heard of it.

Let me do a little more research. I have a friend who does HR in Colorado - she should be able to tell me.

According to my friend, CO law is a little vague on this. You might want to make a quick call to the state DOL.