CalSavers is a state-run California retirement program designed for small businesses, self-employed individuals, etc., and provides a safe and secure way to contribute to an Individual Retirement Account (IRA).

Starting in 2019, the program provides an alternative to other retirement programs, such as a 401k, allowing another option for private sector employers. Employers who are not offering another retirement plan are required to use CalSavers. California Governor Gavin Newsom recently expanded the CalSavers retirement program to cover almost all California employers. Senate Bill 1126 was signed into law on August 29, 2022 and will go into effect on January 1, 2023. The goal of the bill is to make sure more California employees have access to retirement accounts and benefits.

Prior to the expansion, CalSavers required all employers with 100 or more employees to register for a retirement plan by September 30, 2020, employers with 50 or more employees to register by June 30, 2021 and employers with five or more employees to register by June 30, 2022. Starting on January 1, 2023, employers with 1 or more employees must register for CalSavers and should register before December 31, 2025.

Employers with California Based Employees

Employers with California based employees who do not currently offer a retirement plan, should visit the CalSavers website and register their buisness.

Employers who choose to use CalSavers as their retirement plan should follow the following steps to set up their employees:

1. Register on the CalSavers website.
2. Add employee information and submit employee contributions with each payroll.

Employers who choose not to use the CalSavers retirement plan, opting instead to use an alternative retirement plan, should:

1. Register on the CalSavers website.
2. Submit an exemption form.

Employer Exemptions

Employers who do not want to use CalSavers, may use an alternate qualified retirement savings plan instead.

Qualified Retirement Savings Plans
Acceptable alternative plans include:

• 401(a) plans

• 401(k) plans

• 403(b) plans or tax-sheltered annuity plans

• Simplified Employee Pension (SEP) plans

• Saving Incentive Match Plans for Employees of Small Employers IRA plans (SIMPLE)

• Individual Retirement Accounts (IRA)

In order to remain compliant all businesses must submit an exemption request if they prefer to use an alternative retirement plan. If an employer has received a notice regarding their non-compliance, they have ninety-days to comply and will be fined. Employers who have not received a compliance notice should apply for CalSavers or submit an extension as soon as possible; even if they missed the June 30, 2021 deadline.

CalSavers Employee Eligibility

Participating employers may enroll new employees on the first day of employment, if they are over the age of eighteen and are legally employed in the State of California. A waiting period is not required when using the CalSavers program. It is essential employers upload required information to the employer portal for participating employees within a 30-day period starting on the employee’s hire date.

Contributing to a CalSavers Plan

California State Law currently calls for automatic enrollment for employees. If the employee does not finish setting up their account prior to the thirty-day deadline, CalSavers will automatically enroll them.

Currently, the program does not accept employer contributions, therefore all contributions must be made by the employee. After the enrollment is complete, employees can decide their contribution rate and investments. Employees that do not select a rate, CalSavers will set an automatic contribution rate of five percent of their gross pay.

After the employer has uploaded the initial required documents, their involvement will be limited to deducting contributions from their employees. Therefore, employers are not required to pay any fees for participating employees.

Non-Compliance Penalties

The current fine for CalSavers non-compliance is $250 per eligible employee. Businesses who receive non-compliance notices must pay the fine and become compliant within the 90-day period allotted on the notice. If they remain non-compliant beyond 180 days, they will face an additional fine of $500 per eligible employee, or a total of $750 per eligible employee. Therefore, it is vital businesses remain compliant and stay ahead of the CalSavers deadline.

Conclusion

CalSavers provides California based employees with a retirement plan and requires all California employers to facilitate employee retirement plans. Businesses must become compliant with CalSavers, or face heavy fines per eligible employee, therefore it is essential any small businesses visit the CalSavers website and register their business before the deadlines. For assistance remaining complaint with California laws, questions regarding CalSavers and other retirement plans, or other accounting help, contact the trusted Chugh, LLP accounting team.