Question: Is my employer required to offer a retirement plan?

Answer: As of June 30, 2021, eligible California employers who do not already offer their employees an employer-sponsored retirement plan, and who have more than 50 employees, are required to either sponsor a retirement plan or participate in the CalSavers Retirement Savings Program (“CalSavers”).

CalSavers is a state-run retirement plan for private sector workers whose employers do not offer traditional retirement plan programs. CalSavers provides automatic enrollment and contributions made through payroll deductions. Once an employee is enrolled, the money saved belongs solely to the employee, and the account can move freely with the employee from one job to the next.

CalSavers is mandated for all private employers in California, both for-profit and non-profit entities, that do not already sponsor a retirement plan for their business and that have 5 or more California based full- or part-time employees over the age of 18 (“Eligible Employers”). Employers who maintain or contribute to a Tax-Qualified Retirement Plan which qualifies for favorable federal income tax treatment, regardless of whether all employees are eligible for the Plan, or employers who have fewer than 5 employees are prohibited from participating in the Program.

The law requires Eligible Employers to register online, or certify their exemption from CalSavers by stating that their business already maintains a retirement plan, prior to the applicable effective date. The CalSavers rollout includes staggered deadlines for registration based on employer size:

Effective Date Number of Employees
June 30, 2020 (later extended to September 30, 2020) More than 100 employees
June 30, 2021 More than 50 employees
June 30, 2022 5 or more employees

All Eligible Employers with 50 or more employees should now be registered for CalSavers or should register as soon as possible. Additionally, employers with at least 5 employees who do not already offer a workplace retirement plan can register for CalSavers today and must do so before June 30, 2022. Employers may register at the following link: https://employer.calsavers.com/. There is no employer fee for participating in the program.

Existing employees of employers that participate in CalSavers must be enrolled within 30 days after the employer registers with CalSavers.  Employees hired after the employer registers will be automatically enrolled within 30 days of their date of hire or date of eligibility. Despite this automatic enrollment, participation in CalSavers is voluntary for employees, who may choose to opt out at any time. Once the employer is enrolled, on each payroll date it must deduct and transfer each participating employee’s contribution to the CalSavers administrator. All employee contributions must be remitted as soon as administratively possible, not to exceed seven business days from the date of deduction.

CalSavers is not sponsored by the employer, meaning the employer is neither responsible nor liable for an employee’s decision to participate in the program or for the performance of investments. An employer’s responsibilities under CalSavers are limited to registering for CalSavers, providing employee information to the CalSavers administrator, and remitting employee contributions through payroll deductions. An employer’s failure to allow eligible employees to participate in CalSavers can subject it to a fine of up to $500 per eligible employee.

When providing information about CalSavers to employees, employers are required to remain neutral about their employees’ participation in the program.  The CalSavers regulations expressly preclude employers from requiring, endorsing, encouraging, prohibiting, restricting, or discouraging employee participation in CalSavers, or from providing any advice or direction regarding any employee decision about CalSavers (e.g., investment choices, contribution rate, etc.).

More information can be found at https://www.calsavers.com