In 2016, Governor Brown signed Senate Bill 1234 requiring the state’s Secure Choice Retirement Savings Investment Board to begin development of a workplace retirement savings program, known as CalSavers, for private sector workers whose employers do not offer a retirement plan. The program is required to have minimal administrative requirements for employers and state law protects employers from any liability or fiduciary responsibilities. State law also requires the program to be exempt from the Employee Retirement Income Security Act.
The program launched a pilot initiative with a small group of participating employers in November 2018. Beginning in July 2019, all eligible employers can register for the program.
Employers with five or more employees will be required to either provide a retirement plan for their workers or register for CalSavers and facilitate employees’ contributions to Individual Retirement Accounts. Deadlines for compliance vary according to the size of the business.
| Size of Business | Deadline |
|---|---|
| Over 100 employees | June 30, 2020 |
| Over 50 employees | June 30, 2021 |
| 5 or more employees | June 30, 2022 |
The program requires employers to facilitate employees being able (employee contributions are voluntary) contribute to a traditional IRA (Individual Retirement Account) that that the program sets up and manages.
The employer is responsible for registering for the Program, providing basic employee roster information to the Program for eligible employees (name, date of birth, Social Security Number or ITIN, and contact information), and facilitating by payroll deduction the appropriate contributions each pay cycle. That’s it. Note that all information provided is received and maintained in a secure environment.
If the employee elects to have payroll deduction contribution, this is not a pre-tax payroll deduction as other salary reduction retirement plans are. There is no employer contribution component. The employer is required to remit over the deducted funds to the program. Payroll deductions occur after a 30 day notification period. Eligible employee must be 18 years of age or older.
State law establishes CalSavers as, what is commonly referred to as, an “automatic enrollment program”. Eligible employees who do not choose to opt out will be enrolled automatically in the program.
Employees are enrolled with limited employer involvement. When an employer registers for CalSavers, the employer provides basic employee roster information to CalSavers.
CalSavers uses this information to contact employees directly to make them aware of the Program and provide the opt-out or customization methods. If an eligible employee takes no action within 30 days, they will be automatically enrolled in the program under the default saving settings. If they wish to make changes to their account setting or opt out of participating in the program, they will be directed to contact CalSavers.
After registration and enrollment, employers are responsible to deduct and remit each saver’s contributions, each pay period. Employers are also responsible to add new eligible employees to the program within 30 days of their date of hire or date of eligibility. However, employers are to remain neutral about their employees’ participation and not encourage or discourage participation.
If the employee does nothing after s/he receives the employee information packet by email or mail, a payroll-deduction of 5% of their gross pay will be contributed to their account each pay cycle and invested in CalSavers’ default investment fund, beginning with the first payroll cycle after 30 days from when the employee information packet detailing the program is sent to you. The employee can change this contribution amount, opt out, or make other changes to their account at any time.
The employees’ accounts are portable across multiple employers. Employees can opt out online or by contacting Client Services at 855-650-6918 or clientservices@calsavers.com. You can also opt out by mail using the form found on our website. In order to opt out, you must provide the last four digits of their Social Security Number or Individual Tax Identification Number, date of birth, and ZIP Code.
For more information, visit CalSavers on the California State Treasurer’s website.
Employer Eligibility and brief overview: https://employer.calsavers.com/home/employers/program-details.html
FAQ https://www.calsavers.com/home/about/frequently-asked-questions.html?language=en#
Employer Overview: https://cdn.unite529.com/jcdn/files/CAER/pdfs/en_US/ca_er_overview.pdf
Employer resources: https://employer.calsavers.com/home/employers/resources.html
Attorney explanation that contains important program details not easily found within the CalSavers web site at post time: https://www.lexology.com/library/detail.aspx?g=b2531cf4-4c0d-4425-bc18-abd1aef7f2fc#:~:targetText=The%20number%20of%20employees%2C%20for,available%20data%20from%20the%20reports.
