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CalSavers starts September 2020 – What you need to know?

According to the Labor Center at UC Berkeley, sixty-one percent of private sector employees in California, do not have access to an employer-sponsored retirement plan. CalSavers is a program designed to help bridge that gap by offering a state-run Roth IRA program. A Roth IRA is an individual retirement account similar to a traditional IRA with the most notable difference being that Roth IRA’s are funded with after-tax dollars; the contributions are not tax-deductible.

 

The program stipulates that eligible California employers must offer a retirement savings plan of their own OR offer CalSavers to their employees. If they fail to offer anything, a fine will be issued by the CalSavers Retirement Savings Investment Board.

 

How does it work?

Enrolling in Calsavers is not mandatory; It is mandatory that an employer that falls within the stated guidelines, offer a qualified retirement savings plan to its employees.

If a qualified employer fails to comply the fines will be issued as followed:

  • $250 per employee if the employer did not offer a retirement plan of their own or CalSavers on or before 90 days of the violation notice issued to the company.
  • An additional $500 per employee if the company is found to be in noncompliance 180 days or more of the initial violation notice.

There are no fees for employer’s participating in CalSavers and they will not be considered as fiduciaries. Employers will simply submit participating employee contributions to CalSavers via a payroll deduction.

CalSavers starts September 2020 – What you need to know?

What does it include?

  • Employee deductions are automatically set to five percent of an employee’s gross pay.
  • Employees can opt out (they must re-opt out every two years).
  • Employees can adjust their settings.

What employers are eligible?

The requirement to offer CalSavers Or another qualifying retirement savings plan is being phased in gradually based on headcount.  However, all employers can enroll into CalSavers at any time.

The deadlines to meet the requirements are:

  • September 30, 2020 employees with >100 employees.
  • June 30, 2021 employers with >50 employees.
  • June 30,2022 employers with 5+ employees.

Get expert HR and payroll assistance with your retirement plans and ensure accurate processing and compliance. Contact Payroll Systems and let one of our payroll specialists walk you through our easy-to-scale solutions for your business.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.