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CalSavers Retirement Requirement for Employers in California

November 15, 2022 1448

About CalSavers

In 2012, California was the first state in the nation to pass legislation establishing an automatic enrollment retirement policy for private sector workers who lack access to work-based retirement plans. Authorized in final form in 2016, The California Secure Choice Retirement Savings Trust Act, or “CalSavers” program fully launched on July 1, 2019.

Operating at no taxpayer expense, CalSavers is professionally managed by private sector financial firms with oversight from a public board chaired by the State Treasurer.

The mission of the CalSavers program is to ensure all Californians have a path to financial security in retirement by providing a simple, portable, low-cost way for workers to choose to invest in their futures by requiring employers to participate in the program if they do not offer a retirement plan.

The final deadline for employers with 5 or more employees was June 30, 2022. 

Employers with five or more workers who did not register with CalSavers by June 30, 2022, are out of compliance and must register immediately or face enforcement action that includes financial penalties.

Each spring, CalSavers assesses employer mandate status using employee data that employers submit to the Employment Development Department (EDD). Employers who reported an average of five or more employees on the four DE9C filings for the prior year are mandated and have a registration deadline of December 31.

Affected employers can satisfy this new requirement in one of the following ways:

NEW! Effective January 1, 2023, employers with 1-4 employees are required to comply.

California recently passed legislation (SB 1126) to expand the CalSavers mandate to employers with at least one employee. Starting on January 1, 2023, employers with 1-4 employees can begin to register with CalSavers. This segment of mandated employers has until December 31, 2025, to register their business.

Businesses that do not employ any individuals other than the owners are exempt from the expansion of the mandate. Additionally, the usual categories of exempt employers will remain exempt. That includes government entities, religious and tribal organizations, and employers that sponsor a retirement plan.

Initial Registration Timeline

  1. Once you receive your access code, register for CalSavers.
  2. From the initial registration date, you will have 30 days to enter your employee roster and additional account information.
  3. Your employees will be contacted directly by CalSavers with all necessary information. If they have any questions, or wish to make any changes to their account, they should contact CalSavers Client Services directly.
  4. Upon enrollment, employers will be provided an email template at the time of your registration that you may share with your employees to inform them that CalSavers will reach out to them. To alleviate confusion, check in with employees to ensure they received the notification and take action before their automatic payroll contributions begin.
  5. Employers must remain neutral about their employees’ participation in the program.
  6. During the employee 30-day action period, familiarize yourself with the program.
    1. Add bank information so that funds can be transferred electronically into each employee's retirement savings account.
    2. Identify any internal individual(s) that that may help you with managing your CalSavers activities.
    3. Review the programs Contribution Toolkit. This toolkit is used to upload employee contribution information.
      • Discuss next steps for submitting payroll contributions with your payroll company.
      • The service provider will be provided access and asked to create and send payroll files to CalSavers program on behalf of the business.
  7. Employees will be notified about enrollment and have 30-days to evaluate their options and make any changes. If no action is taken, after 30 days, they will be automatically enrolled in CalSavers with the standard contribution rate of 5% (to a maximum of 8%) and initial investment funds.
    1. Do nothing
    2. Customize their options
    3. Opt out
  8. Once the 30-day period is up, employer contributions must be initiated and submitted to the program for each paycheck. Employee funds must be remitted within seven days of taking the deduction out of the participating employee’s paycheck.

CalSavers FAQ's:

How do I register?
Employers who have not received an Access Code may request a code on the home page or in the Help Center. To request the code, you will need to have your Federal Employer Identification Number (EIN/TIN) number and zip code ready.

Does a SEP IRA or Simple IRA meet the requirement?
Yes. You may report your company as “exempt” if you sponsor a SEP IRA or Simple IRA.

If I register for CalSavers, who do I need to enroll?
All staff, including part-time, temporary, and full-time, must be enrolled within 30 days of hire.

How do employees qualify?
All employees of a participating employer are eligible as long as they are at least age eighteen and have the status of an employee under California law. There are no minimum requirements based on hours worked or tenure with their employer.

What are my administrative duties if I register for CalSavers?
You will be responsible for enrolling staff, maintaining staff roster, setting up automatic payroll deductions, and transmitting the funds to the plan each payroll.

How soon do employee contributions start?
Employee contributions to CalSaver do not begin until the first payroll following the 30-day notification period, so depending on the length of employment, short-term employees may not be able to make contributions.

What if I do not have five employees yet, but anticipate having more then five in the future?
Employers with one to four employees are required to register beginning January 1, 2023 through the December 31, 2025 deadline. 

Can I make contributions on behalf of my employees?

No. Employers are not allowed to make contributions on behalf of, or as a match to, employee contributions in this program. If an employer wishes to make contributions to a retirement plan on behalf of their employees, they should explore offering an employer-sponsored retirement plan.

How do I assist my employees with their accounts?
Employees are responsible for maintaining their account information once it is established. It will be tempting to want to help, but please direct them to the CalSavers employee portal or have them speak with a CalSavers representative. Employers must not:

  • Encourage or discourage participation
  • Provide advice about investment options, taxes or participation in the program
  • Manage investments
  • Process distributions
  • Manage employee personal changes (i.e., change address, add beneficiary)

What do I do if an employee leaves the practice?
Notify CalSavers of the employee changes through your CalSavers Dashboard.

What happens with my employees account if they leave my employment?
The plan is portable from employer to employer. A CalSavers account belongs to the employee and is not tied to an employer. Employees can keep the account throughout their career. If they change employers, the employee's money remains in the account, and they can contribute to it independent of an employer.

If an employee should work for a new employer that facilitates the CalSavers Program, then they will receive enrollment notification and payroll deductions into their CalSavers account will begin with their new employer unless the employee chooses to opt out.

What happens if I fail to comply?
Beginning in January of this year, CalSavers began to impose penalties for non-compliant employers.

The initial legislation that passed in 2016 established that a non-compliant employer would be penalized $250 per employee upon the first penalty notice and, if noncompliance persists another 90 days, an additional $500 per employee penalty would be imposed, for a total of $750 per employee for sustained non-compliance.

This could mean an employer of fifteen employees who fails to comply could face $11,000 in fines.

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