Is a retirement plan mandatory in California?
Why is California mandating a retirement plan?
California has been working on getting affordable retirement savings tools to its workers for many years. The mandate was put into place to help Californians help save and have access to affordable retirement savings tools. With more than 7.5 million workers without access to workplace retirement savings tools, California wanted to make it easier for these workers to save and put into place the CalSavers program.
What are the deadlines for the tiered rollout of the mandate?
Previously, businesses with 50 or more employees in California must provide a retirement plan to their employees by June 30, 2021. For businesses with five or more employees, the deadline to provide a retirement plan by June 30, 2022. On May 6, 2021, the Ninth Circuit upheld California’s retirement plan mandate and confirmed that ERISA does not preempt it. To be compliant, all employers must offer their employees a retirement plan such as a 401(k). Penalties may apply for non-compliance.
What is the CalSavers Retirement Savings Program?
CalSavers Retirement Savings Program is a Roth IRA plan that does not allow employers to contribute. As many as 240,000 small businesses are a part of this mandate and will need to start a new 401(k) or use the CalSavers auto-IRA program. CalSavers has registered over 20,000 employers since July 2019, and participants have already saved more than $154 million.
How does the CalSavers Program work?
CalSavers is a Payroll Deduction IRA program, also referred to as an “Auto IRA” plan. The CalSavers plan requires employers with at least five employees to automatically enroll employees at a 5% deferral rate with an automatic annual increase to a maximum of 8%.
How do I remain compliant as a business owner?
As a business owner, you must register on CalSavers Retirement Savings Program and either accept or decline their program by June 30, 2022. As a business owner, getting on board with the mandate will only take a few minutes to enroll with CalSavers. By clicking on HR Ledger as your payroll company, our company will add all your employee information on your behalf.
If you have any questions or concerns, please reach out to us directly!
Here is a quick video to help you set up your account.
HR Ledger can help, too. We will help you set up your account and make sure you have what you need!
Please call Scott today at 800-451-1136.