California has adopted a state run retirement savings plan, known as “CalSavers”.
Starting as soon as next year, California now requires employers who don’t already offer a qualifying employer-sponsored retirement plan, such as 401(k), 403(b), Pension Plan, SEP or SIMPLE Plan to start offering the CalSavers program.
The program rolls out in a three-phase registration deadline, starting as early as next year, mandated with penalties for non-complinace.
CalSavers is an individual ROTH IRA (Individual Retirement Account) option that must be offered by businesses with 5 or more employees.
All contributions are enter as a non-deductible Roth IRA.
All employees, age 18 and over, are immediately eligible to participate.
There are no eligibility requirements based on hours worked after the employee has completed a least 30 days of service. 2
CalSavers currently offers five investment options:
Asset based fees range from 0.825% to 0.95%3
Unless an employee specifically opts-out of the CalSavers program, contributions to the plan should be set to automatically be deducted from employee’s paycheck:
Employees may opt-out of both the auto-enrollment and the elected deferral rate.
All monies are always 100% vested!
1 CalSavers.com / Employer / Program Details
2 CalSavers.com / Employee / Investments
3 CalSavers.com / About / FAQ
Because CalSavers accounts are Roth IRA’s, the accounts are subject to federal Roth IRA contribution limits:
High income earners who pass the phase-out limit will not be able to contribute to the CalSavers program.
Even if an employer or key highly compensated employees are ineligible to contribute to the Roth IRA, the employer is still required to offer the CalSavers plan to all eligible employees (unless the employer offers a qualifying employer sponsored plan).
4 CalSavers.com / Savers / Contributions
This outline is for informational purposes only and has not provided legal or tax advice.
Employers should consider consulting with their tax, business and legal advisors before adopting either the CalSaver plan or an Employer Sponsored 401(k).
For more detailed information on CalSavers, visit www.calsavers.com.
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