In 2016, the California Legislature passed a bill that laid the foundation for a state-run retirement plan, and in 2018, the final governing regulations were adopted. Eligible employers can begin to register for the CalSavers Retirement Savings Program (CalSavers) on July 1.
CalSavers is a retirement savings program for private sector workers whose employers don’t offer a retirement program. Once the program goes into effect, employees who haven’t opted out are automatically enrolled in CalSavers, and CalSavers will remove a percentage of their pay to save for their retirement.
Although eligible employees will be automatically enrolled, participation in the CalSavers program is voluntary, and employees can opt out at any time.
Private sector employers who meet these two requirements are considered eligible employers:
• Have five or more employees; and
• Don’t maintain or contribute to a “tax-qualified retirement plan,” which is a plan that qualifies for favorable income tax treatment under Internal Revenue Code Sections 401(a), 401(k), 403(a), 403(b), 408(k) or 408(p) (payroll deduction IRA programs that don’t provide for automatic enrollment don’t qualify).
Although CalSavers is scheduled to open for employers to register on July 1, 2019, employers aren’t compelled to register until June 30, 2020, at the earliest. Specifically, employers with:
• More than 100 employees must register by June 30, 2020;
• More than 50 employees must register by June 30, 2021; and
• Five or more employees must register by June 30, 2022.
Under the CalSavers program, employers must:
• Register for the CalSavers program in compliance with the above schedule.
• Within 30 days of registering, provide the CalSavers program administrator with a collection of personal information about each individual employee. This information includes: the name, Social Security number, date of birth, and contact information for each eligible employee.
• Ensure that each employee receives a packet of information from the program administrator.
• Calculate the appropriate rate of deduction for each employee, based on a schedule contained in the regulation.
• Deduct each employee’s contributions to the CalSavers program from their salary.
• Remit the employee’s contributions to the program administrator within seven days of deduction.
In addition, if a new employee is hired after registration, that individual’s information must be submitted within 30 days of the date of hire.
Employers don’t pay any fees for their employees’ participation in the CalSavers program and are not required to contribute to the CalSavers program aside from remitting the prescribed portion of their employees’ salaries.
Employers are expressly prohibited from encouraging or discouraging employees from participating in the CalSavers program, or from providing any advice about any decisions related to investment and contribution relating to the program.
Employers can register via the CalSavers website, by phone, by overnight mail or by regular mail.