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CalSavers Retirement Savings Program Explained

CalSavers Retirement Savings Program Explained

June 08, 2021

Retirement savings is a common benefit offered to attract and retain employees. It can be a valuable benefit, especially with company contributions that can vest over time, retaining key employees. If you are business owner reading this, set a time with us to discuss what plans are appropriate for your business. For those employers who do not have the desire or ability to start a plan, there is an alternative in California.

CalSavers is a retirement savings program for private sector workers in California whose employers do not offer retirement plans. Employers with five or more employees must participate in CalSavers unless they sponsor a retirement plan. If the employer does not sponsor their own retirement plan, they must register their exemption from the state mandate

CalSavers retirement plans Consist mainly of payroll deduction ROTH IRA’s. Employees are automatically enrolled at 5% gross pay, which increases 1% each year for three years up to a maximum of 8%. They are funded solely by the employee and their participation is completely voluntary. Employees can decide to opt out of the plan at any point in time. These plans are administered by a private-sector financial services firm and overseen by a public board chaired by the State Treasurer.

There is a limited employer role in CalSavers. Most of the work coming from uploading employee information to CalSavers and submitted participating employee contributions to CalSavers via simple payroll deduction. There are no fees for employers to facilitate the program and employers are not fiduciaries of the program.

The deadline to enroll or register exemptions is as follows:

Eligible employers with more than 100 employees – Deadline was September 30, 2020

Eligible employers with more than 50 employees – Deadline is June 30, 2021

Eligible employers with five or more employees – Deadline is June 30, 2022

Employers are exempt from CalSavers if they maintain 403(a) Qualified Annuity Plan, 403(b) Tax-Sheltered Annuity Plan, 408(k) SEP Plan, 408(p) SIMPLE IRA Plan, 401(a) Qualified Plan (including profit -sharing plans and defined benefit plans), 401(k) Plans, and payroll deduction IRA’s with automatic enrollment.

The employer penalty for failing to comply would be $250 per eligible employee if noncompliance extends 90 days or more after notice. If employer is found to be noncompliant 180 days or more after notice, an additional penalty of $500 per eligible employee applies.

Employers can enroll or register exemption at