Maybe not surprisingly, many California employers are in the dark about the looming deadline to provide access to their employees to a retirement savings plan. All California employers with five or more employees, who do not offer a qualified workplace retirement savings plan, are required to register (or certify as exempt) with the CalSavers Retirement Savings Program by June 30, 2022, to avoid penalties.
At the time the California legislature passed the CalSavers Retirement Savings Trust Act in 2017, approximately 7.5 million California workers had no access to a retirement savings plan. The Act was passed to remedy the bulk of the disparity, establishing the state run CalSavers program for private sector employees.
In addition, many private retirement plan companies have stepped up with robust and affordable retirement plans that employers can take advantage of for their employees.
For those who want to at least be in compliance, CalSavers, though limited in regard to its investment offerings, is free and the registration process is relatively easy. The program starts off with a standard deduction of 5% from gross pay with auto escalation of 1% up until it reaches 8%. Employees, however, may choose their own rate and opt out of auto escalation. The contributions go into a simple target date fund that has an administrative fee cost of 0.825% to 0.95%, dependent on investment choices.
Employers who already sponsor a qualified retirement plan, must file an exemption on the CalSavers website.
To learn more about CalSavers, please visit the website at www.calsavers.com. If you want to learn about other great options, contact us at 866-476-2123 and we would be happy to provide you some options for free.