A new mandatory state-run retirement program has opened for registration! Here are a few things you need to know.
CalSavers Retirement Savings Program (CalSavers) is a state-run retirement savings program for private-sector employees whose employers do not offer a retirement program. Any employer with at least five employees that doesn’t already offer a qualified workplace retirement savings plan will be required by California law to offer and facilitate employee access to CalSavers.
|Size of Business||Deadline|
|Over 100 employees||June 30, 2020|
|Over 50 employees||June 30, 2021|
|Five or more employees||June 30, 2022|
Using a payroll list provided by the employer, CalSavers will auto-enroll employees in a standard savings and investment election. Employees can customize their savings amount and/or investment preferences. Employees also have the option to opt-out of the program. CalSavers is administered by a private-sector financial services firm and overseen by a public board chaired by the State Treasurer.
CalSavers is officially open for registration as of July 1, 2019. Eligible employers can register for CalSavers at any time and must register by the following deadlines based on employer size.
If you have less than five employees or you already offer a qualified retirement savings plan, your employees cannot participate and you are not required to register.
For all others, an employer’s general obligation is limited to:
• Registering for CalSavers,
• Creating a payroll list to add employees to CalSavers,,
• Calculating the appropriate deduction for each employee (shown on the employer’s account page)
• Submitting employee contributions to the CalSavers program, and
• Keeping the payroll list up-to-date.
Of course, there will be “soft-dollar” time to the employer with handling this reporting and payroll function.
Limited Employer Role
CalSavers does not have any employer fees. It also does not require any employer contributions; employers only send in the employee contribution. Employers are not fiduciaries of the program.
Employers are to remain neutral about the program and can’t encourage or discourage participation or provide any investment advice. Employers are not involved in managing investment options or processing distributions. CalSavers provides information on the program to the employee and will answer questions that employees have.
CalSavers is an “automatic enrollment program”. Eligible employees who do not choose to opt-out will be enrolled automatically in the program.
When an employer registers for CalSavers, the employer provides basic employee roster information to CalSavers. CalSavers uses this information to contact employees directly, make them aware of the program and provide the opt-out or customization methods.
The account is portable and goes with the employee when he/she leaves the job.
Basically, an employee has three options:
1. Do Nothing. If an eligible employee takes no action within 30 days, they will be automatically enrolled with the standard savings and investment elections:
• 5% of the employee’s gross income earned with the facilitating employer.
• First $1,000 of contributions will be invested into the CalSavers Money Market Fund.
• Detailed information about the contribution amounts, automatic increases and investment options can be found in the CalSavers Program Disclosure Booklet.
2. Customize the Account. The employee can choose to customize the account, for instance by changing the contribution rate and investment choices.
3. Opt-Out. An employee can opt-out of participating in CalSavers at any time online, by phone, or mailing in a form. An employee can rejoin the program and begin contributing at any time through the same methods.
Penalties for Non-Compliance
An eligible employer that, without good cause, fails to allow its eligible employees to participate in CalSavers, will be required to pay a fine of up to $250 per eligible employee. Further non-compliance will result in an additional penalty of $500 per eligible employee.