CALSAVERS RETIREMENT SAVINGS PROGRAM
California offers employers an alternative to provide their employees with a self-directed retirement plan. CalSavers Retirement Savings Program (CalSavers) is a retirement plan available to employers with five or more employees that do not already offer an employer-sponsored retirement plan.
State law requires employers with at least five California-based employees, at least one of whom is age eighteen, that do not sponsor a qualified retirement plan, such as a 401(k), 403(a) or 403(b), to register for and offer CalSavers. While there is no employer fee to participate in CalSavers, there are additional employer administration responsibilities, including processing payroll contributions, updating contribution rates and adding newly eligible employees.
For employee participants, there is an administrative charge in the form of an asset-based fee of approximately 0.825% to 0.95%, depending on the investment choice, which is less than $1 per year for every $100 in an employee’s account. This cost is automatically withdrawn from the CalSavers account balance on a regular basis.
CalSavers is an “automatic enrollment program.” Eligible employees who do not choose to opt out will be enrolled automatically in the program. With CalSavers, employees are only eligible to contribute to a Roth IRA, meaning it is an after-tax earnings deduction. The automatic savings is in the form of regular payroll contributions. There are investment options, so employees can decide how to invest their money, choosing from target-date funds, money market funds, core bond funds, global equity funds, and sustainable balanced funds. There is no option for an employer match of employee contributions.
Employer Registration Deadlines
Eligible employers may register at any time. The deadlines vary depending on the size of the business. Eligibility and compliance deadlines are based on the average number of employees throughout the year:
- September 30, 2020: Eligible employers with more than 100 employees
- June 30, 2021: Eligible employers with more than 50 employees
- June 30, 2022: Eligible employers with five or more employees
There is a penalty imposed on employers for noncompliance. Employers that fail to allow its eligible employees to participate in CalSavers or another retirement plan are subject to a penalty of $250 per employee, if an employer stays non-compliant 90 days or more after a notice is received. If the employer is found to still be non-compliant 180 days or more after a notice, there is an additional penalty of $500 per employee.
More information about CalSavers is available here.
To assist in your evaluation of CalSavers and other employee retirement plan options, please connect with us for guidance.