In 2016, the California Legislature passed a bill that laid the foundation for a state-run retirement plan, and in 2018, the final governing regulations were adopted. Eligible employers can begin to register for the CalSaversRetirement Savings Program (CalSavers) on July 1.
CalSavers is a retirement savings program for private sector workers whose employers don’t offer a retirement program. Once the program goes into effect, employees who haven’t opted out are automatically enrolled in CalSavers, and CalSavers will remove a percentage of their pay to save for their retirement.
Although eligible employees will be automatically enrolled, participation in the CalSavers program is voluntary, and employees can opt out at any time.
Private sector employers who meet these two requirements are considered eligible employers:
• Have five or more employees; and
• Don’t maintain or contribute to a “tax-qualified retirement plan,” which is a plan that qualifies for favorable income tax treatment under Internal Revenue Code Sections 401(a), 401(k), 403(a), 403(b), 408(k) or 408(p) (payroll deduction IRA programs that don’t provide for automatic enrollment don’t qualify).
Although CalSavers is scheduled to open for employers to register on July 1, 2019, employers aren’t compelled to register until June 30, 2020, at the earliest. Specifically, employers with:
• More than 100 employees must register by June 30, 2020;
• More than 50 employees must register by June 30, 2021; and
• Five or more employees must register by June 30, 2022.