CalSavers: Retirement Planning Made Easy
By Susannah L. Ashton

What is CalSavers? As of July 1, 2019, employers may begin registering with the CalSavers Retirement Savings Program (“CalSavers” or the “Program”), an IRA designed to benefit employees whose employers do not to offer traditional retirement plan programs.  With minimal action required and no fees or liability for employers, CalSavers is a simple and effective way for employees to save money and plan for the future.

CalSavers is designed to make it easier for employees to save by lowering the barriers that often keep people from doing so: enrollment is automatic and contributions are made through payroll deductions.  Once enrolled, the money saved belongs solely to the employees and accounts can move freely with employees from one job to the next.  CalSavers is not sponsored by the employer, meaning the employer is not responsible nor liable.  Employers’ only responsibilities under CalSavers are limited to registering for the Program, providing employee information to the Program Administrator, and remitting employee contributions through payroll deductions.

Who has to participate in CalSavers? 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 who have more than five full- or part-time employees over the age of 18 (with at least one employee working in the state) (“Eligible Employers”).  However, 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 five employees are prohibited from participating in the Program.  Note that an employer-provided payroll deduction IRA program that does not provide for automatic enrollment is not a Tax-Qualified Retirement Plan.

If you are an employer who is required to participate in CalSavers, what do you need to do? Prior to their mandatory participation date, employers must log on to the CalSavers site to either register online or certify their exemption from CalSavers by stating that their business already maintains a retirement plan.  The effective dates are based on the employer’s number of employees:

Effective Date Number of Employees
June 30, 2020 More than 100 employees
June 30, 2021 More than 50 employees
June 30, 2022 More than 5 employees

 

An employer’s number of employees is the average number of employees as reported to the California Employment Development Department for the quarter ending December 31 and the previous three quarters of available data.

How do employees enroll in CalSavers? Existing employees of Participating Employers must be enrolled within 30 days after the employer registers with the Program and employees who are hired after the employer registers will be automatically enrolled within 30 days of their date of hire or date of eligibility.  Although eligible employees will be automatically enrolled, participation in the CalSavers program is voluntary, and employees may choose to opt out at any time.

What happens to employers who do not comply with CalSavers? Employers who, without good cause, fail to allow their eligible employees to participate in CalSavers, on or before 90 days after service of notice of its failure to comply, shall pay a penalty of $250 per eligible employee if noncompliance extends 90 days or more after the notice, and if found to be in noncompliance 180 days or more after the notice, an additional penalty of $500 per eligible employee.

What else do employers need to do? On each payroll date, the employer must deduct and transfer each participating employee’s contribution to the CalSavers Administrator at the applicable contribution rate for each participating employee.  All compensation must be remitted as soon as administratively possible, not to exceed seven business days from the date of deduction.  Employers may add their own payroll service provider as a delegate to help perform the employer facilitation duties on employers’ behalf.

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

In order to maintain neutrality, the Program will provide an email template at the time of registration that employers may share with employees to inform them that CalSavers will reach out to them.  The employee can then communicate with CalSavers directly to get further information and to answer any questions they may have.  Further, Exempt Employers who wish to inform employees who are ineligible for an employer-sponsored retirement plan about any rights or benefits with CalSavers are encouraged to contact CalSavers directly for guidance.

Employers’ only other ongoing responsibility is to ensure the Employee Information Packet is delivered during each open enrollment period to all eligible employees who are not participating employees (including those who have previously opted out).

 

For more information, employers are encouraged to visit the CalSavers website at https://www.calsavers.com/.