Did you know?
In 2016, Governor Brown signed Senate Bill 1234 requiring the State’s Secure Choice Retirement Savings Investment Board to begin development of a workplace retirement savings program, known as CalSavers, for private sector workers whose employers do not offer a retirement plan. The program is required to have minimal administrative requirements for employers and state law protects employers from any liability or fiduciary responsibilities. State law also requires the program to be exempt from the Employee Retirement Income Security Act.
The program launched a pilot initiative with a small group of participating employers in November 2018. Beginning in July 2019, all eligible employers can register for the program.
According to EDD, employers with five or more employees will be required to either provide a retirement plan for their workers or register for CalSavers and facilitate employees’ contributions to Individual Retirement Accounts. Deadlines for compliance vary according to the size of the business.
CalSavers compliance deadlines, by business size:
Size of Business Deadline
Over 100 employees June 30, 2020
Over 50 employees June 30, 2021
5 or more employees June 30, 2022
For more information, visit CalSavers on the California State Treasurer’s website
What does this mean for employers?
If your company does not already have a retirement plan in place, this new requirement may create administration hurdles. Payroll processing companies will likely expand their services to offer processing of employee contributions.
CalSavers accounts will be Roth IRAs and will be an opt-out program which means that, unless the employees affirmatively opt-out within 30 days, they will be enrolled in the program. The employer will be required to submit contributions for each participating employee via a payroll deduction. The default savings rate is 5% of gross pay with an annual increase of 1%, capping at 8% of gross pay. Employees will have the option to adjust the percentages.
As an association we strive to keep you up-to-date on relevant information for your business. We will keep you updated on CalSavers as additional information becomes available.