The CalSavers Retirement Savings Program is California’s new retirement savings program that will offer eligible employees in California the opportunity to save for retirement through automatic payroll contributions facilitated from their workplace. The employer deadlines for registration were rolled out in three (3) phases.
The third phase of this program requires employers with 5 to 50 California-based employees to offer a retirement savings program or enroll as a participating employer in the CalSavers Retirement Savings Program by June 30, 2022.
The deadline for both the first two groups (101+ employees and 51-100 employees) have passed. Enforcement of employer compliance of these two groups is currently underway.
Who is a Mandated Employer?
Not all employers are required to participate. Employers should first determine their mandate status. Only employers who do not sponsor a retirement plan and have 5 or more California employees must join CalSalvers. Employer eligibility is based on an employer’s average number of employees throughout the year. This number is calculated by averaging the number of employees reported to the Employment Development Department on an employer’s previous four DE9/DE9C filings from the prior calendar year.
What Do Employers Need to Do?
Mandated employers will need to register their company by providing their company’s Federal Employer Identification Number or Tax Identification Number (EIN/TIN) and their CalSavers Access Code. Employers can find their access code in emails and letters sent to their business by CalSavers, or can request one through the CalSavers website if they cannot locate it.
Once registered, employers must submit information for each eligible employee. The Program will then contact the employees directly by email or mail with information about CalSavers. Employees will have 30 days to decide to participate or opt out. If the employees do not make a selection, they will be auto-enrolled in CalSavers.
After the 30-day opt out period ends, employers will begin facilitating payroll deductions from each payroll period through bank transfer. Contributions must be sent within 7 days of taking the money out of the employees’ paychecks. These deductions will be added to the employee’s account and invested according to their selections. Employers will be responsible for keeping their employer account up-to-date on an ongoing basis.
Penalties for Noncompliance
Failure of mandated employers to register by June 30 may result in a penalty of $250 per employee for noncompliance within 90 days after receipt of a notice of failure to comply. The penalty increases to $500 per employee if noncompliance continues for more than 180 days after notice.
Employers Play a Limited Role
Employers are tasked with facilitating the CalSavers Program by adding and maintaining their employee roster and submitting contributions via simple payroll deductions. Otherwise, employers are not responsible for answering questions about the program, managing investment options, processing distributions, or giving investment or tax advice. Instead, employees will maintain their accounts and direct their inquiries directly through the CalSavers Program.