Starts June 2020 for Companies with > 100 Employees
CalSavers is a mandatory retirement savings program (formerly called Secure Choice) that phases in beginning in July of 2020 and entitles all eligible California employees to register for a retirement program.
Employers with five or more employees have two choices. 1) They are required to provide a retirement plan for their workers, or 2) They have to register for the CalSavers plan and facilitate the employees’ contributions to Individual Retirement Accounts (IRAs). Deadlines for compliance vary according to the number of employees in the company.
Deadlines for Compliance
|Size of Business||Deadline|
|Over 100 employees||June 30, 2020|
|Over 50 employees||June 30, 2021|
|5 or more employees||June 30, 2022|
Will It Cost You Anything?
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 reasonably 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 require a minimal investment of time.
From the Cal Savers website, the rules are as follows:
There are no fees for employers
- Registering a business was designed to be easy
- Employers have minor duties: to facilitate the program and submit participating employees’ contributions via payroll deduction
- Employers cannot make contributions to their employees’ accounts
Details of the Program for the Employee
- Their CalSavers account is an after-tax Roth IRA
- Thirty days following the state deadline (as noted above), employees will be automatically enrolled in the retirement program if they do not opt out. They will start saving through payroll contributions.
- The pre-described savings rate is 5% of gross pay, and employees can change their percentage whenever they want.
- They can opt out and back in at any time
The Nitty Gritty
Registration: Register any time before your deadline, based on the number of employees as above.
Account Setup: Once you have registered, you will need to upload your list of eligible employees within 30 days. Consult your HR department, a payroll specialist, or the state rulings for the definition of “eligible.” As an example, part-time employees may not be eligible, and part-time might be fewer than 20 hours or some other definition. Also, employees with fewer than 30, 60, or 90 days of service, for instance, may be ineligible. Check with your legal counsel specializing in payroll issues to be sure. You may also need to ask your outsourced payroll company’s representatives to help with the initial setup if you have a lot of employees to process in a short time frame.
Ongoing Responsibilities: After your account has been set up, you will only have to focus on submitting contributions and adding or removing employees.
“No job is done until the paperwork is complete.” We’re not sure who said it, but it’s true. To help with this task, the State of California has provided downloadable forms to reduce the time you will need to offer this benefit to your employees.
Communication to Your Employees (A convenient fill-in-the-blank template.)
- Program Disclosure Booklet (It’s 38 pages long.)
- Employee Information Packet (A two-page sign-up/opt-out form.)
Minimal Expense, No Fiduciary Responsibility
The CalSavers plan adds a tiny bit to your payroll handling expense in terms of registering and handling 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 makes it clear that employers are not responsible for the return on any investments in the CalSavers programs. The sign-up/opt-out forms provided by the State of California and the Program Disclosure Booklet contain legal language to make sure employees understand not only the parameters of the program, but also the general benefits and risks of investing. It also makes clear that participation in the program is optional for the employee.
Remember: All employers with five or more employees must participate by the due dates.
Please Contact Us. As always, we are here to answer any questions relating to this issue. If the query is outside our scope, we will refer you to trusted specialists who can help you.
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This information outlines the new California legislation. It is not intended to be, nor should it be construed as legal advice for any particular fact situation.