hrc blog
California Introduces New State Workplace Retirement Savings Program For California Workers
The Mandate: For businesses with five (5) or more employees, the program is mandatory. The employer must offer employees CalSavers, or a qualified retirement plan chosen by the employer, to avoid a penalty. The employer can be liable for a $750 per employee penalty for repeated non-compliance. CalSavers opens July 1, 2019 to all eligible employers, including the self-employed, temporary workers, and others. Eligible employers must begin offering CalSavers or a qualified retirement plan, before the following deadlines: - Businesses with over 100 employees, the deadline is June 30, 2020 - Businesses with over 50 employees, the deadline is June 30, 2021 - Businesses with five (5) or more employees, the deadline is June 30, 2022
Limited Employer Responsibilities: The employer is responsible to register with CalSavers, submit an employee roster, submit participating employee contributions to CalSavers via simple payroll deduction, and then provide roster updates. There is no cost to employers to both facilitate or act as a fiduciary of the program. In other words, employers do not contribute to employer savings accounts, nor address questions about the program, nor encourage or discourage participation.
Employee Responsibilities: Employees are automatically enrolled in CalSavers and participation is voluntary; an employee can opt in or out at any time. The default CalSavers payroll deduction is 5% of pay, automatically increasing 1% a year up to 8% of pay. However, employees can change their payroll deduction rate at any time. The Roth IRA is standard, allowing withdrawals without penalties or taxes. Employees also can choose a traditional IRA. If the employee moves to another job, the IRA can be transferred or left with CalSavers.
Cost: CalSavers is funded out of fees assessed to the employee's retirement savings account. At launch, the fee is expected at 82.5 cents to .95 cents for every $100 per year, and is projected to drop as the program grows. Most of the fees are allocated to administering the program. While the rest of the fee is for managing investments, ranging from .25 cents to .15 cents depending on the investment option chosen by the employee.
Next Steps: Employers have up to their respective deadlines to register with CalSavers and begin the process of making available retirement plans to their employees. Employers that wish to offer a qualified retirement plan, other than what CalSavers provides, may consider consulting with a third-party benefits administrator as to the type of qualified plans available. It is anticipated that more information about the CalSavers' program will be made available on and after the July 1 launch date. Stay tuned!
https://www.treasurer.ca.gov/scib/