CalSavers: What California Employers Need to Know About the State’s Retirement Savings Mandate
- epiainsurance
- Jun 2
- 3 min read
Retirement security is a growing concern across the United States, and California has taken a proactive step to address this issue with the introduction of the CalSavers Retirement Savings Program. This state-mandated initiative aims to provide millions of workers with access to retirement savings options, especially those employed by businesses that do not offer retirement plans.
What Is CalSavers?
CalSavers is a state-sponsored retirement savings program designed for California workers who lack access to employer-sponsored retirement plans. Through automatic payroll deductions, employees contribute to a Roth Individual Retirement Account (IRA) managed by the state. The program is intended to be simple for employers to facilitate and beneficial for employees aiming to secure their financial future.
Key Features:
Automatic Enrollment: Employees are automatically enrolled after a 30-day opt-out period.
Default Contribution Rate: Starts at 5% of gross pay, with an automatic annual increase of 1% up to 8%, unless the employee chooses a different rate.
Portability: Accounts are owned by the employees and move with them if they change jobs.
No Employer Fees: Employers are not required to contribute financially to the program.
Employer Responsibilities
Employers play a crucial role in facilitating CalSavers but are not involved in managing the investment aspects.
Their primary responsibilities include:
Registration: Enroll in the CalSavers program by the applicable deadline.
Employee Information: Provide necessary employee details to CalSavers.
Payroll Deductions: Facilitate the automatic payroll deductions for employees who do not opt out.
Ongoing Maintenance: Keep employee information up to date and manage contributions as required.
Employers are not permitted to:
Advise employees on investment choices.
Contribute to employee accounts.
Manage or oversee the investment funds.
Compliance Deadlines
The CalSavers program has been rolled out in phases based on the number of employees:
100 or more employees: Deadline was September 30, 2020.
50 to 99 employees: Deadline was June 30, 2021.
5 to 49 employees: Deadline was June 30, 2022.
1 to 4 employees: Deadline is December 31, 2025.
Employers who have not yet complied with the requirements should take immediate action to avoid penalties.
Penalties for Non-Compliance
Failure to comply with CalSavers mandates can result in significant financial penalties:
Initial Penalty: $250 per eligible employee if non-compliance extends 90 days after the notice.
Additional Penalty: An extra $500 per eligible employee if non-compliance continues for 180 days or more.
These penalties are enforced by the Franchise Tax Board (FTB) and can accumulate quickly, emphasizing the importance of timely compliance.
How EPIA Can Help
Navigating the CalSavers requirements can be complex, but EPIA is here to assist. Our services include:
Assessment: Determining your business's obligations under CalSavers.
Registration Assistance: Guiding you through the registration process.
Payroll Integration: Helping set up and manage payroll deductions.
Employee Communication: Providing resources to inform your employees about the program.
Our goal is to ensure your business remains compliant while minimizing administrative burdens.
Final Thoughts
CalSavers represents a significant shift in how retirement savings are approached in California, aiming to provide more workers with the opportunity to secure their financial futures. For employers, understanding and complying with the program is essential to avoid penalties and support employee well-being.
Need assistance with CalSavers compliance?
Contact EPIA today for expert guidance tailored to your business needs.
📞 +1 626-912-1988
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