The State of California now requires businesses with five or more employees to either offer an employee retirement plan or participate in the CalSavers Retirement Savings Program by June 30, 2022. CalSavers is a state-based payroll withholding savings program using Roth (post-tax) individual retirement accounts. All employers with five or more employees must either register with CalSavers or offer a qualifying retirement plan.

The CalSavers program has been rolled out in phases, and the state is already issuing penalty notices to businesses that missed the earlier deadlines or failed to allow eligible employees to participate in the retirement savings program.  The penalties are significant:

• $250 fine per employee for 90 days of noncompliance
• $500 fine per employee for 180 days of noncompliance

Eligible employers must register with the program via the program website (employer.CalSavers.com) or by calling 855-650-6916.

Employers have the following options:

1. Participate in the CalSavers retirement savings program. This is a state program with a ROTH IRA— an individual retirement account with lower contribution limits than a 401(k) plan. The employer has administrative responsibilities and employers participating in the program are not eligible for SECURE Act tax credits.
2. Enroll in a retirement plan, like a 401k or Simple IRA. 401(k) plans allow employees to contribute more than three times the amount of an IRA ($20,500 versus $6,000). And, new 401(k) plans may be eligible for up to $15,000 in SECURE Act1 tax credits.
3. Already offer a retirement plan? Visit the CalSavers website to register as an Exempt Employer.
4. Determine if Payroll Provider is an API for CalSavers. If your business has already chosen to participate in CalSavers, you will need to report IRA contributions and employee changes every pay period. As an Automatic Payroll Integration (API) provider for the state of California, many payroll providers can help make managing the IRA easier and more affordable.

We can work with you to determine the best retirement solutions to fit your needs. Please contact us at 858.481.7702 for further assistance.