In 2016, former California Governor Jerry Brown signed Senate Bill 1234 into law, requiring the Secure Choice Retirement Savings Investment Board to begin developing a workplace retirement program for private sector workers whose employers do not offer a retirement plan. This program is known as CalSavers.
The CalSavers program launched in November 2018 with a pilot program and, as of July 1, 2019, became available to all eligible employees.
With compliance deadlines fast approaching, it is important that California employers are aware of the CalSavers program, their compliance obligations, and other general information about the CalSavers program.
Here are a few quick points employers should know about the CalSavers program:
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What is CalSavers?
CalSavers is an automatic enrollment payroll deduction individual retirement account (“IRA”) program. The program is designed to provide employees access to a voluntary, portable workplace retirement savings program, that is professionally managed with oversight from a public board of directors.
Workers can participate in the program through their employer or through their own. They can choose their contribution rate, change their investments, and opt-out or opt-in at their own choosing.
Do Employers Have to Comply with CalSavers?
Only “eligible employers” are required to comply with CalSavers. An “eligible employer” is defined by law to mean any person or entity engaged in a business, industry, profession, trade, or other enterprise in the state (including non-profits), excluding federal and local government entities, that has five or more employees.
An employer that provides an employer-sponsored retirement plan, such as a 401(k) or 401(b) plan, is exempt from the requirements of the CalSavers program, so long as the plan qualifies for favorable federal income tax treatment under the Internal Revenue Service (“IRS”) Code.
What Are an Employers Compliance Obligations?
Generally, the employer is responsible for registering for the CalSavers program, providing certain specified information to the program, and facilitating payroll deduction contributions each pay cycle.
Employees are automatically enrolled in the program, and CalSavers contacts employees thereafter to make them aware of the program and provide employees with opt-out information.
Employers should neither encourage nor discourage participation in CalSavers.
What Employees Are Eligible to Participate in CalSavers?
Any employee of an eligible employer is entitled to participate in CalSavers, subject to limited exceptions.
How Does My Business Register for CalSavers?
Employers are able to register for the CalSavers program via the program’s website, available here: https://www.calsavers.com/. Alternatively, an employer is permitted to register via phone by calling (855) 650-6916, by overnight mail (CalSavers 95 Wells Avenue, Suite 155, Newton, MA 02459), or by regular mail (CalSavers, P.O. Box 55759, Boston, MA 02205-5759).
When Do I Have to Register?
The deadlines for registering for the CalSavers program depend on the number of employees your business employs.
- For eligible employers with more than 100 employees, the registration deadline is June 30, 2020.
- For eligible employers with more than 50 employees but not more than 100, the registration deadline is June 30, 2021.
- For eligible employers with 50 or fewer employees, the registration deadline is June 30, 2022.
All employers who become “eligible employers”, as defined by law, after July 1, 2019, shall register either by the date(s) set forth above, or within 24-months of the date upon which the employer became an eligible employer, whichever is later.
How Are the Number of Employees Calculated for Purposes of CalSavers?
To determine whether an employer is an “eligible employer” for purposes of the CalSavers program, an employer’s number of employees is determined by averaging the number of employees during the previous calendar year, as reported by the employer to the Employment Development Department (“EDD”) on Form DE 9C, “Quarterly Contribution Return and Report of Wages (Continuation),” for the quarter ending December 31 and the preceding three quarters.
What Happens If I Fail to Comply?
There are penalties for noncompliance of either $250 per employee or $500 per employee if an employer fails to allow its eligible employees to participate in the CalSavers program.
Given potential penalties for non-compliance, it is important to approach this new law proactively and build a system of compliance at your workplace.
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Recently, the State of California began sending notices to businesses regarding the CalSavers program. Should you receive such a notice and/or need help registering for and complying with CalSavers, please contact an attorney at Sagaser, Watkins & Wieland PC for further guidance.