The California State Treasurer’s office has begun sending email reminders to California employers to register for the CalSavers Retirement Savings Program (CalSavers). CalSavers was passed into law in 2016. California employers with five or more employees, and at least one of whom is age 18 or over, are required by state law to participate in CalSavers if they do not offer an employer-sponsored retirement plan.
Employers are required to register for this program. Employers that already offer a retirement plan for their employees are exempt from the CalSavers program. However, such employers must certify their exempt status with CalSavers.
The employers’ registration deadline as shown below is based on the number of employees:
- September 30, 2020: Employers with more than 100 employees
- June 30, 2021: Employers with 51-100 employees
- June 30, 2022: Employers with 5-50 employees
Employers that missed the September 30, 2020 deadline should register as soon as possible to avoid penalties.
For the employer, there are no fees, fiduciary responsibilities or liability for investment decisions made by participating employees. Once an employer registers, the employer will need to provide basic employee information to the program for eligible employees: name, date of birth, Social Security number or Individual Tax Identification Number and contact information. The employer will then begin making the employee contributions via payroll deductions each payroll period. Employees may opt out of the program, as the program is voluntary for employees.
The initial contribution rate is 5% of wages, with an automatic 1% annual increase every year, to a maximum of 8%. Employees may opt out at any time or customize their contribution rate as they wish.
Contributions are made to an after-tax Roth Individual Retirement Account. Participants have the option to re-characterize their contributions to a traditional Individual Retirement Account, which would allow the contributions to be deductible on their personal returns (if they meet eligibility requirements). The 2020 contribution limits are $6,000 if under 50 years of age, and $7,000 if 50 years or older.
Employers who fail to comply with the program requirements will be subject to a $250 per employee penalty after receiving a notice of noncompliance. The penalty will be increased to $500 per employee if the employer does not comply within 180 days.
Additional information can be found at the CalSavers website at https://www.calsavers.com/