CalSavers, a state-sponsored retirement savings program for private sector workers, has extended its first implementation deadline, which applies to businesses with 100 or more employees, to September 30, 2020. Learn more about how California’s mandatory retirement program will affect businesses and workers below.

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What is CalSavers?

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CalSavers was created in 2016 to serve the millions of California workers that lack retirement savings programs through their employers. California employers who do not already sponsor retirement plans must either register with CalSavers or offer an alternate retirement plan by the applicable deadline, which is based on employer size. CalSavers accounts are also available to self-employed workers. The program gives employers an uncomplicated, low-cost means of helping their employees build retirement savings.

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A CalSavers account is set up as a payroll-deducted Roth Individual Retirement Account (IRA), which an employee can opt in or out of at any time. This account belongs to the employee, and will remain with the employee even if they change jobs. Employees that do not opt out of the CalSavers plan proactively will automatically be enrolled 30 days after their eligibility or hiring date. The standard contribution rate for eligible employees is 5 percent, with 1 percent automatic escalation, up to 8 percent of the employee’s salary. Employees also have the option to choose their own savings and investment rates.

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How will CalSavers affect California business owners?

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Business owners that register for and implement CalSavers have no fiduciary duties, reporting tasks, or employer fees associated with the program. The plan is designed to give employers minimal responsibilities in implementing the program; after a business is registered with CalSavers, the employer must only continue to add new employees and submit participating employees’ contributions via payroll deduction.

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Any employer can register for the CalSavers program at any time at this link. All businesses with 5 or more employees are required by California law to offer a retirement plan or register for and facilitate the implementation of CalSavers by the appropriate deadlines, which are staggered by business size over three years. The deadlines are as follows:

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• Businesses with 100 or more employees: September 30, 2020
• Businesses with 50 or more employees: June 30, 2021
• Businesses with 5 or more employees: June 30, 2022.

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Non-compliance with these deadlines may result in penalty fees of either $250 or $500 per eligible employee, depending on the length of time an employer has failed to comply with the mandate.

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Resources for California Employers

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If you anticipate California’s retirement program mandate affecting your business in the next couple of years, it is important to begin weighing your options. Below are some resources to help you navigate this process:

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Register for CalSavers or certify your exemption here.

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Access the CalSavers Employer Overview PDF here.

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Access resources for implementing CalSavers here.

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If you have questions regarding this article, contact The Maloney Firm at 310.540.1505.

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