Financial Advisory Blog

Armanino’s Financial Advisory blog is your source for thought leadership around cloud ERP and accounting solutions and integrations. Supported by the Cloud Accounting Institute and numerous experts in cloud, finance, reporting, integration, compliance, and technology, Armanino’s Financial Advisory blog features must-read content on what’s happening in the finance industry, case studies, white papers, and much more.

September 28, 2020

California Implements New CalSavers Retirement Savings Program

Posted by Jennifer Orchard

The end of the year is approaching fast — time to catch up on upcoming California legislation.  One of the laws delayed due to COVID-19 is the CalSavers Retirement Savings Program. which has a compliance deadline on September 30, 2020. 

This new law was enacted to encourage and give employees a way to save for retirement.  To achieve this goal, California lawmakers are mandating that employers with five or more employees offer a retirement savings option to their employees, with the registration deadlines based according to the number of employees.

Already have an employer-sponsored retirement plan?  Excellent!  This means you do not have to enroll in the CalSavers Retirement Savings Program, but you do need to register online and indicate you have a plan.  Your business may have already been identified as exempt if you file Form 5500. We recommend confirming your exempt status online to avoid non-compliance. For employers who do not already have a retirement savings plan, this law now requires you to either provide an employer-sponsored retirement plan or use the CalSavers plan. 

Here are some details employers should know:

Who This Effects

  • September 30, 2020 – employers with more than 100+ employees
  • June 30, 2021 – employers with more than 50+ employees
  • June 30, 2022 – employers with more than 5+ employees

CalSavers Program Highlights

  • There are no fees for employers to use this plan.
  • Employers cannot make contributions to employee accounts — this is driven by the employee deductions only.
  • The default contribution rate is 5% of employee gross pay. While employees can change that at any time, each year the contribution is auto-escalated up 1%, up to 8%. Further, participants can opt out of auto-escalation at any time.
  • The employee will be auto-enrolled 30 days after hire unless they opt out. 
  • Employees are responsible for knowing if they are eligible for a Roth IRA and will receive the information from CalSavers.
  • The employee pays minimal administrative and plan fees, and the employee account is portable and stays with them even if they leave your workplace.

Employer Administration Responsibilities With CalSavers

Employers are required to:

  • Submit an employee census and track all eligible employees.
  • Provide enrollment packets to new hires.
  • Manage contributions in the payroll system and transfer them to the CalSavers plan, which is outside of your company.

Proposed Penalties for Employer Non-compliance

  • $250 per eligible employee 90 days after notice of non-compliance
  • $500 per eligible employee 180 days after notice of non-compliance

No matter what retirement plan you choose, by June 30, 2022, if you are a California employer with five or more employees, you will need to provide an employer-sponsored retirement plan or CalSavers to your employees.  Have questions? Armanino’s experts are here to help you interpret these laws, mitigate your risk, and set up and manage the appropriate retirement plan.  Contact us to learn more.

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