The Deadline for
Businesses with > 50 Employees Is
JUNE 30, 2021
CalSavers Requirements 2021 for Mandatory 401K Plans
In January of 2020, an LSL CPAs blog introduced you to the new CalSavers Mandatory 401K Plan. CalSavers requirements are mandatory; a retirement savings program that began in July 2020 and that replaces its predecessor, Secure Choice.
The CalSavers program entitles all eligible (private sector) California employees to register for a retirement program. To comply with this mandate, employers with five or more employees are required to either:
- Provide a retirement plan for their workers OR
- Register for CalSavers and facilitate employees’ contributions to Individual Retirement Accounts.
Deadlines for compliance vary according to the size of the business.
Deadlines for Compliance *One Deadline HAS PASSED*
| Size of Business | Deadline |
| Over 100 employees | June 30, 2020* Deadline Passed REGISTER NOW.
|
| Over 50 employees | June 30, 2021 Deadline SOON. DON’T DELAY.
|
| 5 or more employees | June 30, 2022 Deadline NEXT YEAR. DON’T FORGET. |
Will It Cost You Anything? NO.
The CalSavers Retirement Savings Program was designed to make it simple for employers to help their employees save for their future retirement. With no employer fees, minimal ongoing responsibilities, and no fiduciary responsibility, the program offers a relatively painless way to help your employees gain a little foothold on saving for the future. Although it is not a choice, it still ends up being a pretty nice way of saying “thank you” to your employees.
Details of the Program for the Employer
For the employer, the program should not require a big investment of time.
The Cal Savers website lists the rules as follows:
- Registering your business is easy
- There are no fees for employers
- Employers serve a limited role: facilitate the program and submit participating employees’ contributions via simple payroll deduction
- Employers cannot make contributions to employee accounts
- com provides employers with templates, tips, and support so employers can focus on running their businesses. (See below under paperwork.)
- Employers cannot make contributions to employee accounts.
What Employers Need to Do
Registration: Register any time before your deadline, based on the number of employees as noted above.
Account Setup: Once registered, you need to upload your list of eligible employees within 30 days of registering. You can also add delegates or payroll representatives to help with these tasks.
Ongoing Responsibilities: After the account is set up, you will be in “maintenance mode” and only have to focus on submitting contributions and adding or removing employees. Don’t forget to do this.
Paperwork
The State of California has provided downloadable forms to reduce the time needed to offer this benefit to your employees. It’s a good idea to read through these so you can advise employees of their choices and your role. There are even webinars now to help employers and employees learn about the program.
- Program Disclosure Booklet (38 pages long)
- Employee Information Packet
Details of the Program for the Employee
For the employee, the program means they may have an opportunity with little muss or fuss to save money painlessly for the first time in their lives.
- Their CalSavers account is an (after-tax) Roth IRA
- The default savings rate is 5% of gross pay, and employees can change their percentage at any time
- Employees will be auto-enrolled after 30 days if they do not opt out and will begin saving through payroll contributions
- The employees can opt out and back in at any time
- Employees’ accounts are ‘portable,’ meaning it stays with them if they leave one employer and go to another.
Minimal Expense, No Fiduciary Responsibility, Great Way to Help Your Employees
The Cal Savers plan adds a tiny bit to your payroll handling expense in terms of registering and taking employee sign-ups and such, but the program itself does not cost you anything. It’s probably helpful to view it positively as a way to encourage people to save money that might not otherwise do so.
The Communication to Your Employees form clarifies that employers are not responsible for the return on any investments in the Cal Savers programs. Legal terminology on the sign-up/opt-out forms provided by the State of California and the Program Disclosure Booklet attempt to ensure employees understand the general risks of investing. It also makes clear that while participation in the program is optional for the employee, all employers must participate.
ONE LAST THING!
Please ensure that if you already have a plan in place for your employees, you STILL NEED TO FILL OUT THE FORM certifying your exemption for your company.
Please Contact Us. As always, we are here to answer any questions relating to this issue.
* * *
Disclaimer:
This information outlines the California legislation. It is not intended to be, nor should it be construed as legal advice for any particular situation.
Sources:
https://www.edd.ca.gov/employers/calsavers.htm
https://employer.calsavers.com
Alternatives to CalSavers (Because You Don’t HAVE to Use It)
CalSavers Requirements 2021.
