CalSavers e-mails being sent to employers (12-10-20)

The California State Treasurer has begun sending e-mails to California employers telling them to register for CalSavers, California’s “new retirement savings program.” These are not fraudulent e-mails, but they are being sent to employers who are not yet required to register for the program.

The program is being phased in over a three-year period, and employers must register and participate on the following dates. Employers with:

• More than 100 employees were required to register by September 30, 2020;
• More than 50 employees must register by June 30, 2021; and
• More than 5 employees must register by June 30, 2022.

If you currently offer a retirement plan to your employees, you must still certify an exemption for your business through the CalSavers website.

If you do not offer a plan for your employees, you must also enroll each of your employees in a CalSavers account unless the employees opt out. CalSavers accounts are Roth IRA accounts and are subject to contribution and participant income limits applicable to all other Roth IRA accounts.

Once registered, an employer must provide CalSavers enrollment notification packets to employees who are age 18 or older during an annual enrollment period. The law does not provide any exceptions for short-term or part-time employees. So, any employee age 18 or older must begin funding the plan, or opt-out, by their first paycheck issued 30 days after the employee notification.

For employees who do not opt out, the employer must collect, remit, and report contributions for each payroll period. An employee’s initial default contribution rate is 5% the first year the employee is enrolled, increasing by 1% each year, up to 8%. Employees choose how their money is invested and have the option to:

• Opt out at any time; or
• Pay lower or higher contribution rates.

Employers who fail to comply with the program requirements will be subject to a $250 per employee penalty after receiving a notice of noncompliance. The penalty will be increased to $500 per employee if the employer does not comply within 180 days. Employers do not have any liability for an employee’s decisions to participate in the program, for their investment decisions, or for the performance of those investments.