California has begun their mandate of employer participation in the CalSavers Program.  The program’s 3-year phase-in is as follows:

What is CalSavers?

CalSavers is California’s new retirement savings program for workers in the private sector who do not currently have a way to save at work (i.e. the employer does not provide an employee retirement plan (EBP)). While “eligible employers” are required to make the Plan available, it is voluntary for employees.  CalSavers operates similar to a Roth IRA.

• Plan is funded by employee savings (no employer fees or contributions).

• “Eligible Employers” must enroll all employees in a CalSavers account unless the employee formally opts-out. Employee participation is completely voluntary and they can opt-in or opt-out at any time.

• Plan is administered by a private-sector financial services firm and overseen by a public board chaired by the State Treasurer.

Employer Role is Limited to the Following

• Upload employee information to CalSavers.

• Submit participating employee contributions to CalSavers via simple payroll deduction.

• There are no fees (going either direction) for employers to facilitate the program

• Employers are not fiduciaries of the program.

CalSavers Basics

Employer notification

Employers are being notified by the CalSavers program of their requirement to:

• register in the program, or
• claim an exemption from the registration requirements.

Employee notification

Upon registration in CalSavers, the employer must provide CalSavers Enrollment Information Packets to employees who are >=18 years old during an annual enrollment period.

No Exceptions for Transitory or Part-Time Employees

It should be noted that the law does not appear to provide exceptions for transitory, or part-time employees.  As such, any >=18 year old employee must begin funding the Plan immediately with their first paycheck . . . unless they formally opt-out.

Initial Default Contribution Rate

The first year that an employee is enrolled, their initial default contribution rate is 5%.  This rate increases by 1% (i.e. one percentage point) each year, up to a maximum of 8%.

Employee Choices

Employees have the ability to:

• Determine how their money is invested from a list of offered funds
• Opt-out (or opt back in) at any time
• Change their contribution rate

Employer Liabilities

CalSavers Employer Non-Compliance Penalties

Employers who do not register with CalSavers and/or otherwise fail to comply with the program requirements are subject to:

• a $250/employee penalty after receiving a notice of non-compliance
• if the employer does not comply within 180 days, the penalty increases to $500/employee

Employers are Not Liable for:

• Employee’s decisions to participate, or not participate, in the program
• Employee’s investment decisions
• Performance of investments

Registration Information

To register your business, you’ll need three pieces of information before you begin:

• Federal Employer Identification or Tax Identification Number (EIN/TIN)
• CA Employer Payroll Tax Account Number (from EDD)
• CalSavers Access Code from your notification

If you did not receive a notification and/or otherwise do not have an access code, you may request an Access Code here.

Resources

• CalSavers Website
• FTB Bill Analysis

(This is Blog Post #942)