CalSaver Penalty for No Enrollment
A lot of employers want to know:
Are there penalties for not enrolling into CalSavers?
Short Answer: Yes. 4
As posted on the CalSavers website:
Each eligible employer that, without good cause, fails to allow its eligible employees to participate in CalSavers, on or before 90 days after service of notice of its failure to comply, shall pay a penalty of $250 per eligible employee if noncompliance extends 90 days or more after the notice, and if found to be in noncompliance 180 days or more after the notice, an additional penalty of $500 per eligible employee.
So, if an employer with 101 employees who does not enroll by the June 2020 deadline receives a notice and does not take action with 3 months, they could be fined as much as $25,250. If they wait another three months from then, that fine could increase to a total of $50,500.
How to avoid CalSavers requirements
The foremost way for a business to avoid having to offer a state-run plan is by offering a qualifying employer-sponsored retirement plan, such as 401(k), 403(b), Pension Plan, SEP or SIMPLE Plan .
Among many reasons to consider a 401k over the CalSavers plan is to allow the most valued employees to benefit.
Because CalSavers accounts are Roth IRA’s, the accounts are subject to federal Roth IRA contribution limits:
Contribution limits based on Modified Adjusted Gross Income6 |
Year | Single Filer | Married/Joint Filer |
2019 | $122,000 - $137,000 | $193,000 - $203,000 |
2020 | $124,000 - $139,000 | $196,000 - $206,000 |
How much can I contribute to a 401k or IRA in 2020?
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).
As we know it in today’s tax laws:
