CalSavers Retirement Program

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I’m sure you already know the importance of a retirement program for your employees. 

However, navigating which retirement program is best for your employees is confusing. There are a ton of options and each plan could work great for different types of companies. 

That’s why I went ahead and explained everything you need to know about CalSavers (and other retirement programs) right here.

What Is Cal Savers?

CalSavers is a savings plan for private company employees in California. 

To put it in simple terms, this retirement plan is a ROTH IRA that gives employers an easy way for their employees to save for retirement. (note: you cannot contribute to your ROTH IRA and the CalSavers retirement program)

This is important because all privately-owned California companies are required by law to offer a retirement plan to their employees. If you have more than 5 employees and you do not have a retirement plan in place, you need to sign up for CalSavers

The goal of CalSavers is to be as easy as possible for employers. CalSavers has no employer fees, no fiduciary responsibility, and minimal ongoing duties. 

Requirements

California employers who already offer a workplace retirement plan or have fewer than 5 employees are exempt from facilitating CalSavers. Not only that, but religious organizations, tribal entities, and government agencies are also exempt. 

If your company has more than 100 employees, the deadline has already passed. It was on September 30, 2020.

If your company has more than 50 employees, the deadline for you to offer a retirement plan was on June 30, 2021.

If your company has more than 5 employees, you have an extra year and the deadline for you to offer a retirement plan is June 30, 2022.

The plan automatically takes contributions out of each employee’s payroll once they sign up for it. Each employee can contribute up to $6,000 per year. (just like a traditional ROTH IRA)

If your company is late to register for CalSavers, you will be fined.

For the first 90 days of not registering, your company will receive a “failure of notice to comply”.

From days 90-180 of not registering, your company will be fined $250 per eligible employee.

After 180 days of not registering, your company will be fined $500 per eligible employee.

Employer Responsibilities

Once you register your company, within 30 days you will upload a roster of all of your eligible employees. CalSaver will then contact each employee, and have them complete their profile, ultimately deciding if that employee wants to join the program or not. 

As an employer, it is helpful to your employees to demonstrate how they can sign up. 

Here is where each employee can sign up: https://employer.calsavers.com/?language=en#

They can also incorporate their automatic payroll deductions by going here: https://employer.calsavers.com/home/employers/payroll-providers.html

(Important note: if you are exempt from CalSavers, you will need to notify them here: https://employer.calsavers.com/californiaertpl/enroll/createEmp/viewCollectEmpPreRegDetails.cs?)

Other Investment Options

There are many different types of retirement programs that your employees could benefit from. 

I made this table so you can compare each plan and see what is right for you. 

Program typeBenefitsDrawbacks
Defined benefit/Pension plan– Predicted retirement payments
– Employers are allowed to have a higher deduction from this plan
– Costly and complicated
401(k)– Often employers match contributions 
– Limited amount of investment choices
– High fees usually come with this plan type
Simple IRA– Deductible contributions will lower your tax burden– You won’t be able to deduct your contributions if you or your spouse has a retirement plan at work. (only if your income exceeds IRA limits)
– Required minimum withdrawals start at age 72
SEP IRA– Higher contribution limits than standard IRA’s and 401(k)s– Only self-employed and employers can use this program
ROTH IRA– Tax-free distributions in retirement 
– Contributions can be withdrawn at any time with no penalty. (just the principal, not the investment earnings) 
– If your income is too high, you will not be able to contribute
– Since you pay taxes upfront, it will only be beneficial if your tax rate is lower in retirement than when you contribute
CalSavers– Automatic payroll deductions
– No employer fees
– No fiduciary responsibilities.  
– CalSavers is a ROTH IRA, and has income limits
– Limited investment options
– No worker protections under ERISA

Communicate with your employees

By state law, every privately-held California company with more than 5 employees needs to offer a retirement plan.

But it is also important to understand what your employees want. Maybe CalSavers is for them, maybe it is not for them.

It is best to clearly communicate what the real cost is to the employees. For example, The CalSavers market fund has an annual cost of 0.83% – 0.95% per year depending on their investment choice.  (source CalSavershelp.com)

Compare this to other investment options so your employees understand what is the best option for them. 

Share this with our employees so they can better understand CalSavers: https://employer.calsavers.com/home/employers/resources.html

What Does It All Come Down To?

Every business will need a different retirement program for its employees. 

If you still have any questions about retirement programs (or anything else finance-related) feel free to reach out to us

Investment Advisor

Disclosures

WealthGuard Advisors, Inc. is a Registered Investment Adviser.  California Life Insurance license numbers: Casey Murdock #0F01130.

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