February 10, 2021

CalSavers Program: Legislation Created to Assist in Employee Retirement Planning

By Jia In, Senior, Tax & Business Services

CalSavers Program: Legislation Created to Assist in Employee Retirement Planning Tax & Business

California has passed legislation to create the CalSavers program to ensure all Californians have a path to financial security in their retirement. Employers in California are required by law to facilitate CalSavers if they don’t offer an employer-sponsored retirement plan and have five or more employees. The employer is responsible for registering for the program and for providing basic employee roster information through the CalSavers website for eligible employees.

Registration deadlines are:

  • For an employer with more than 100 employees: September 30, 2020 (date has passed, but still able to register)
  • For an employer more than 50 employees: June 30, 2021
  • For an employer more than five employees: June 30, 2022

If employers miss registration deadlines or fail to allow eligible employees to participate in CalSavers, employers are subject to a penalty of $250 per eligible employee. If noncompliance extends 90 days or more, an additional penalty of $500 per eligible employee will be imposed.

To register, employers will need to obtain a CalSavers access code and provide the federal EIN and a California employer payroll tax account number on the CalSavers website, CalSavers.com.

CalSavers uses the employee information an employer provides during the registration to contact employees directly to inform them of the program and provide an opt-out or customization options. CalSavers program is an automatic enrollment program; if an eligible employee takes no action within 30 days, that employee will be automatically enrolled under the default saving settings. If the employee wishes to make changes to an account setting or opt-out of participating in the program, that individual needs to contact CalSavers directly. CalSavers accounts are Roth IRAs, and those with higher incomes may not be eligible to contribute and may need to opt-out of CalSavers or switch to a traditional IRA.

Employers are not allowed to contribute on behalf of or as a match to employee contributions in this program and have no responsibility for establishing, maintaining or operating CalSavers accounts. However, employers are responsible for meeting their facilitation requirements and may add their payroll service provider as a delegate to help perform the employer facilitation duties on an employer’s behalf.

Requirements are the same for nonprofit organizations, religious organizations, and for-profit employers. Volunteers who are not considered employees under state law are not eligible and will not be included in a nonprofit organization’s employee count.

Should you have questions about the CalSavers program or registration, please contact a Marcum state and local tax professional.

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