As of July 2019, more than half of Californians aged 25-64 had no retirement savings. In an effort to make saving for retirement more accessible, and therefore encourage more people to save, the State of California enacted legislation that requires employers with 5 or more California-based employees (including at least one who is age 18 or over) to either: (1) offer their own retirement plan, or (2) register for the CalSavers Retirement Savings Program (“CalSavers”).
Employer registration deadlines (which vary based on the size of the employer) are as follows:
-September 30, 2020 – for employers with 100 or more employees
-June 30, 2021 – for employers with 50 or more employees
-June 30, 2022 – for employers with 5 or more employees
Registration
For employers that need to register with CalSavers, here’s how it works. Employers register for CalSavers online here, and then provide basic information about their employees, such as each employee’s name, date of birth, Social Security number, and contact information. CalSavers then contacts eligible employees directly to make them aware of the program and their participation options, including how they can opt out if they do not want to participate. Employees who take no action within 30 days are automatically enrolled in CalSavers under the program’s default savings settings, though employees can always change those settings or opt out later.
Employer Responsibilities
The employer is responsible for facilitating the payroll deductions chosen by participating employees. Employers must also update CalSavers within 30 days when new employees are (a) hired, (b) become eligible for CalSavers (i.e., the date an employee turns 18), or (c) separate from employment. However, employers are not responsible for making other changes to employee accounts, including any changes to employee contact information or beneficiary information. Employers are also not responsible for managing employee investment options, including choice of investment funds and processing employee investment change requests, processing distributions, or answering questions about investment options.
Qualified Retirement Plans
Not all employers are required to register with CalSavers. Employers who already offer a qualified retirement plan to employees do not need to register. Qualified retirement plans include any of the following: (1) 403(a) Qualified Annuity plans; (2) 403(b) Tax-Sheltered Annuity plans; (3) 408(k) Simplified Employee Pension (SEP) plans; (4) 408(p) Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA plans; (5) 401(a) qualified plans (including profit-sharing plans and defined benefit plans); (6) 401(k) plans (including multiple employer plans or pooled employer plans); and/or (7) payroll deduction IRAs with automatic enrollment. These are the most common qualified retirement plans, but other plans may qualify as well.
Penalties
There could be costly consequences for employers that fail to register. An employer who is required to register may receive a notice from CalSavers if the employer fails to register in a timely manner. If the employer still has not registered with CalSavers within 90 days from the date of the notice, without good cause, the employer shall pay a penalty of $250 per eligible employee. If the employer is still noncompliant 180 days or more after the notice, the employer will be subject to an additional penalty of $500 per eligible employee.
Thousands of employers have already registered for CalSavers. If you are an employer and your deadline has passed, register now to avoid penalties (and so your employees can start saving for retirement).
