Golden Years: California Rolls Out CalSavers Program to Boost Employee Retirement Savings

California announced the debut of its CalSavers program this month, designed to help employees save for retirement when their employers are not able to offer participation in another retirement program.

California announced the debut of its CalSavers program this month, designed to help employees save for retirement when their employers are not able to offer participation in another retirement program.

The State program, currently operating as an optional pilot, will permit self-employed workers, and other employees who do not have access to an employer-sponsored retirement savings program, to save for retirement through a State-operated Roth IRA.  Businesses that do not offer a retirement savings plan to their employees will be required to register at various times, described below.

Notably, employees will be automatically enrolled in the program 30 days after employer registration and will have to affirmatively opt out.  The default contribution rate is five (5) percent of the employee’s pay, though employees can change their rate at any time.

According to the State Treasurer’s website, employers must “facilitate” the program by (1) registering their business then (2) forwarding employee contributions to the State.  It appears employers will be required to submit information about their payroll and employees to the State, which will contact each employee to set up their account, make investment selections, and/or process the employee’s opt-out. The website indicates that businesses using an external payroll vendor may designate this provider as a “delegate” to handle contributions on the employer’s behalf.

Employers are not permitted to make contributions to employees’ plans and employees are required to make their own investment choices.

Voluntary registration is currently open for the pilot program, and can be completed at: https://www.calsavers.com/

Other registration deadlines are as follows:

  • Voluntary registration for employers of all sizes: June 1, 2019
  • Mandatory registration for employers with more than 100 employees: June 30, 2020
  • Mandatory registration for employers with more than 50 employees: June 30, 2021
  • Mandatory registration for employers with more than 5 employees: June 30, 2022

The State’s website indicates that employers “will be notified by CalSavers” when it is time to register.  Registration will require the following information: (1) the Federal Employer Identification or Tax Identification Number (EIN/TIN); (2) the employer’s Payroll Tax Account Number; and (3) an access code from the CalSavers notification.

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