• CalSavers Mandate: California Employers Have New Retirement Account Requirements

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    January 15, 2021
    CalSavers is a state-sponsored retirement savings program for private sector workers whose employers do not offer a retirement plan. This program gives employers an easy way to help their employees save for retirement, with no employer fees, no fiduciary liability, and minimal employer responsibilities. Employers are required to comply either by offering their own retirement plan and registering that plan, or by participating in CalSavers. 

    Employers may have recently received an email stating that they are required to register for California’s new CalSavers program. However, this requirement currently only applies to California employers with more than 100 employees.  

    The program is being phased in over a three-year period, and employers must register and participate as follows:
    • More than 100 employees were required to register by September 30, 2020;
    • More than 50 employees must register by June 30, 2021; and
    • More than 5 employees must register by June 30, 2022.
    Employers who currently offer a retirement plan to their employees must still certify an exemption for their business through the CalSavers website. 

    Employers who do not offer a plan for their employees must also enroll each of their employees in a CalSavers account unless the employees opt out. CalSavers accounts are Roth IRA accounts and are subject to contribution and participant income limits applicable to all other Roth IRA accounts.

    Once registered, an employer must provide CalSavers enrollment notification packets to employees who are age 18 or older during an annual enrollment period. The law does not provide any exceptions for short-term or part-time employees. So, any employee age 18 or older must begin funding the plan, or opt-out, by their first paycheck issued 30 days after the employee notification.

    For employees who do not opt out, the employer must collect, remit, and report contributions for each payroll period. An employee’s initial default contribution rate is 5% the first year the employee is enrolled, increasing by 1% each year, up to 8%. Employees choose how their money is invested and have the option to:
    • Opt out at any time; or
    • Pay lower or higher contribution rates.
    Employers who fail to comply with the program requirements will be subject to a $250 per employee penalty after receiving a notice of noncompliance. The penalty will be increased to $500 per employee if the employer does not comply within 180 days.

    Employers do not have any liability for an employee’s decisions to participate in the program, for their investment decisions, or for the performance of those investments.

    To register in the CalSavers program or to certify an exemption go to:

    Questions? CLA can help.
    Michelle Dunsing, Principal, Construction
    michelle.dunsing@claconnect.com, (415) 599-2022
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