California implemented a new mandatory law requiring all companies with more than five employees to offer a retirement plan to their workers by June 30, 2022. Companies that don’t will be required to enroll in CalSavers, the state-sponsored individual retirement account (IRA). Participating employees would elect an amount to save as part of their payroll deductions.
Business that don’t comply will be fined $250 per employee, which will go up to $750/employee if employer fails to comply with 180 days of June 30th.
What Do Employers Need to Do?
- Either register through the CalSavers website, or if you want to offer a qualified private market alternative like a 401(k), then file an exemption on the same CalSavers website.
- After registering, employers are required to add employees within 30 days of completing the registration. Note: there is some light maintenance required after registration.
- If you already offer a retirement plan, be sure to file an exemption on the CalSavers site.
How does CalSaver Work?
- There are no fees or costs for employers who enroll in CalSavers. Employees who enroll pay a percentage of their balance as an annual fee.
- With CalSavers, the account offered is a Roth IRA which has a maximum contribution of $6,000 for workers under age 50 in 2022. A 401(k) plan, such as those offered by Guideline, have substantially higher contribution limits.
- The cost employees pay is currently between $0.83 and $0.95 for every $100 in the savings account.
- Offers automatic enrollment and investment options, allowing employees to change their standard contribution rate to a percentage that works for them.
If you missed the deadline, California will grant 90 days to comply from when you are served a failure to comply notice.