CalSavers: Complying with California’s Mandated Retirement Plan

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By: Edith Miranda-Smith and Shuchita Lotlikar

Are you a California employer? Do you have more than five (5) full-time or part-time employees?

If you answer yes to both questions and you do not maintain an employer-sponsored retirement plan for your employees, you should know that California has a state mandated retirement plan known as CalSavers. This new California law promotes employee savings for retirement. Under this program, employers have no liability or fiduciary responsibilities. Further, employers have minimal administrative duties and are not responsible for administrative fees.

How to Enroll in CalSavers

For employers to participate in CalSavers, they must register their business and create a payroll list to enroll their employees. They can also designate a payroll service provider. To complete the registration process on the CalSavers website, employers need to provide their Federal Tax Employer ID Number (EIN) and California payroll tax number.

Employers must make the CalSavers retirement plan available to their employees, and remit employees’ contributions to the CalSavers administrator. There is no need to match contributions or incur the liabilities that come with traditional company-sponsored retirement plans. Employers can register via the CalSavers website, by phone, or by overnight or regular mail. Registration for all eligible employers begins on July 1, 2019.

After registration is complete, CalSavers will send a written notice to the employer. The employer must then send this notice to all their employees. Employees should either accept the enrollment or communicate their rejection within 30 days of the written notice. If they fail to act, the employee will be automatically enrolled in the program at the default savings rate of 5% of gross pay.

The CalSavers investment committee will be handled by a private sector financial firm, under the supervision of a nine-member public board. The committee will manage enrolled employees’ investments.

deadlines for calsavers enrollment

The deadline for employers to implement the CalSavers program varies based on the number of employees:

No. of Employees                            Deadline

Over 100 employees                      June 30, 2020

Over 50 employees                         June 30, 2021

5 or more employees                     June 30, 2022

To register online, please visit www.calsavers.com.

Employer Obligations and Complying with CalSavers

Employers’ obligations are limited to registration, providing basic employee information, and updating the program within 30 days of hiring a new employee. Further, even if employees switch jobs, companies don’t have to face the hassle of rollover of the CalSavers investment, since employees can take their CalSavers accounts with them.

Program registration is free for all employers. However, there may be financial penalties for companies that do not implement the program before the given deadlines.

Using CalSavers as an Employee

Once CalSavers receives information about an employee, it will reach out to them directly with instructions to complete the enrollment process and opt out of the program.

CalSavers will provide employees with online portal access to view their account, make investment selections, or change their savings percentage.

Conclusion

Employers should put compliance systems in place to ensure they meet new CalSavers investment requirements. For help with employee benefits compliance, including CalSavers and 401(K) audits, contact a trusted Chugh CPAs, LLP accountant.