The CalSavers Retirement Savings Program is intended to provide California employees an opportunity to save for retirement. The program targets those who do not already have access to a retirement savings plan by requiring that such employers participate in the state-mandated arrangement. Originally called California Secure Choice, CalSavers was approved by State Legislature in 2016 and is now open for employer registration effective July 1, 2019.

California employers (with at least 5 employees) who do not offer an employer-sponsored retirement savings plan will be required to facilitate CalSavers.

There is a three-year phased rollout, with staggered deadlines for registration based on employer size. All eligible employers can join at any time prior to their registration deadline.

Note: CalSavers is a program only required for employers who do not offer their own company-sponsored retirement plan, such as a 401(k) plan.

Important Facts about CalSavers

For Employers:

• Employers serve a limited role: facilitate the program and submit participating employees' contributions via simple payroll deduction.
• Employers will not receive any tax incentives for using the program.
• There is no employer cost to participate.
• Employers cannot make contributions.
• Failure to comply may result in penalties, proposed at $250 per employee if noncompliance on or before 90 days of notice and $500 per employee if noncompliance of 180 days or more after notice.

For Employees:

• The CalSavers account is a Roth IRA (post tax).
• Employees must be at least 18 years old and have a valid SSN or taxpayer ID.
• Employees will be auto-enrolled after 30 days and will begin saving through payroll contributions.
• Employees can opt out at any time.
• The default savings rate is 5% of gross pay (with automatic increases 1% each year up to 8%), but employees can change their contribution rates at any time.
• Employees are responsible for their investment choices, however the first $1,000 will be invested in the CalSavers Money Market Fund unless the employee elects otherwise.
• For 2020, the annual Roth IRA contribution limit is $6,000 ($7,000 of age 50 or older).

Although the program is now open for registration, it is important to note that various groups are still challenging the law and attempting to invalidate the program. Our recommendation, however, is that employers who are required to participate should comply with the program’s deadlines. For more details, visit CalSavers FAQ.

Questions

Contact Vita if you have any questions about whether your company is subject to CalSavers and/or to discuss retirement plan solutions that may exempt you from participating in the new program.