In an effort to get Californians to save more for retirement, the State has launched a program called
CalSavers. State law now requires that California employers who don’t already offer an employer-sponsored retirement plan and who have five or more employees to either sponsor a retirement plan or participate in CalSavers.
This new program mirrors the efforts of 8 other states and transfers more responsibility on employers to help employees work toward a greater retirement savings. The
program is in effect, but the eligibility deadlines for companies to register comes in stages based on employer size:
July 1, 2020 Organizations with 100 employees or more
July 1, 2021 Organizations 50-99 employees
July 1, 2022 Organizations 5-49 employees
All eligible employers are encouraged to join at any time prior to their registration deadline or otherwise register their exemption.
The CalSavers program at a high-level works as follows:
Employers must offer a Roth IRA retirement vehicle through CalSavers if they don’t already sponsor a qualified retirement plan
Enrollment in the plan is automatic for employees unless they formally opt out
The default savings rate is 5% of gross pay, and employees may change their rate at any time (any may contribute only up to the IRS Roth IRA statutory
The employer may not contribute to the employee fund
There are no employer fees and no fiduciary responsibility
Employee fees charged by the investment entity are permitted, but may not exceed 1% per year
The State of California will run the plan if the employer doesn’t
Participating employers must add employees and submit participating employees’ contribution via payroll deduction
Employees can opt out and back in at any time.
Employees’ accounts are portable and will stay with them even if they leave your employment.
That employees should save more money for their retirement is a given. What is not is whether a Roth IRA with a high minimum requirement, using electronic education
and with state oversight, without a current tax deduction, is not.
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featuring personal investment education and planning, advice on administration and investing, benchmarking studies and an analysis on an array of retirement vehicles. Please contact
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