Effective June 30, 2022, employers with 5 or more employees must either offer a qualified retirement plan to their employees or register to participate in CalSavers.
The requirements are the same for non-profit and for-profit employers, but not government employers. The size of the employer is based on its average number of employees throughout the year, as reported to the Employment Development Department (EDD) on the Form DE 9C during the previous calendar year.
Are there penalties if the employer fails to comply? Yes. According to CalSavers, “Per Government Code Section 100033(b), each eligible employer that, without good cause, fails to allow its 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.”
For many California employers, the applicable implementation deadline has already passed. For others, the deadline is just over a month away. As a reminder, the staggered implementation schedule for CalSavers is:
Size of Business: Deadline:
Over 100 Employees – September 30, 2020
Over 50 Employees – June 30, 2021
5 or More Employees – June 30, 2022
Employers do not have to register with CalSavers if they instead offer their employees a qualified retirement plan. Qualified retirement plans include:
- 403(a) – Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) – Simplified Employee Pension (SEP) plans
- 408(p) – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA Plan
- 401(a) – Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) plans (including multiple employer plans or pooled employer plans)
- Payroll deduction IRAs with automatic enrollment
If the employer already offers a qualified retirement plan, CalSavers asks that the employer inform CalSavers of the employer’s exemption through the employer portal.
Participating employers do not pay any fees to CalSavers, and they cannot contribute to CalSavers accounts. However, employers must register, transmit census data on a timely basis, and submit payroll deductions. Employers may authorize their payroll service provider to help perform these functions on the employer’s behalf.
All employees of a participating employer are eligible if they are 18 or older and have the status of a common law employee under California law. There are no minimum service requirements based on hours worked or tenure with the employer. Furthermore, employees are eligible to participate from the first day they are hired; employers must update their census data with CalSavers within 30 days of an employee’s hire date.
The CalSavers account is a Roth IRA, and the default contribution rate is 5% of gross pay (but the rate can be changed). If they do not opt out, employees are automatically enrolled after 30 days. The IRAs are portable—they stay with employees after they leave their jobs.
CalSavers has posted FAQs and other resources on its webpage: Calsavers.com.
While our agency does not write 401k plans, we are happy to refer you to a solutions provider if you need help. Feel free to Contact us for assistance.
United Agencies, Burbank
Marilyn A. Monahan
Monahan Law Office