Employment Law Bulletin | July 2019
New California Retirement Savings Program Open for Employer Registration July 1
Starting July 1, 2019, California began offering a retirement savings program to private sector employees through the California Retirement Savings Program, or CalSavers.
This new program requires all private sector employers with 5 or more employees who do not currently offer a qualified retirement plan to register for CalSavers or risk costly penalties, discussed below.
But don’t panic. Although employer registration began on July 1, 2019, compliance is not required right away. The compliance deadlines range from June 30, 2020 to June 30, 2022, depending on the number of employees in your organization.
| Number of Employees | Compliance Deadline |
| 100+ employees | 6/30/2020 |
| 50+ employees | 6/30/2021 |
| 5+ employees | 6/30/2022 |
Beyond the registration and payroll deduction obligations, employers are expected to have very little involvement in the administration and management of the program. Employers are not required to make any contribution on behalf of employees, or pay any fees. The is intended to allow employees to save for their own retirement automatically via payroll deduction, at no cost to their employers.
Employee CalSavers accounts, which function similar to Individual Retirement Accounts (IRAs), are self-funded through automatic payroll deductions from the employee’s wages. The state of California set a standard savings rate for CalSavers accounts at 5% of gross pay, which is deducted on an after-tax basis from each paycheck. This savings rate will increase 1% each year until 8% is deducted per paycheck. However, employees are also free to adjust their contribution rate to as little as 1% or to a higher rate, within IRS limits. The CalSavers program is funded by fees charged to the employee accounts, which are estimated to be approximately .83 to .95 cents per year for every $100 in the account. If an employee prefers a different solution for their retirement needs, he or she can opt out of CalSavers at any time.
A covered employer who does not timely offer the CalSavers program will be sent a non-compliance notice by the State. That employer can be fined $250 per eligible employee if it fails to offer the program to employees after being served with a non-compliance notice. An additional penalty of $500 per eligible employee will be levied for non-compliance that continues for more than 180 days after service of such notice. Employers covered by the CalSavers program requirements should pay careful attention to any non-compliance notices received.
For more information on this new program, visit https://www.calsavers.com/. The “Employers” link contains helpful information, a template letter that can be used to introduce CalSavers to your employees, and links to assist your payroll department with the administration of the program. If you have any additional questions about CalSavers and whether it applies to you, please contact us.
No Se Habla Español?
SMT’s employment attorneys can provide your company with employment policies, forms and employee disciplinary documentation in Spanish. Providing such important information to employees in the language they understand is critical to employee performance, providing a welcoming diverse work environment, and protecting your company against employment claims. Contact an SMT attorney today to get started.
Spaulding McCullough & Tansil LLP
Employment Law Group
