Is your business ready for CalSavers?

Galia Aharoni Schmidt, Esq.

If your business has five or more employees in California, you will be required to offer a retirement savings plan by June 30, 2022. Are you prepared?

The State of California has grown increasingly concerned about Californians’ lack of retirement savings. To help combat this, the state created the CalSavers retirement savings program.

What are the requirements?

California businesses with five or more employees must either enroll in the CalSavers program or provide an alternative qualified retirement plan such as a 401(k), SEP, or IRA.

To use CalSavers, join online by registering at and providing your company’s FEIN and the CalSavers access code mailed to you from the EDD. You can request an access code on their website if you did not receive one. For each eligible employee, you will need to submit their name, birthday, physical address, phone number, email address, and social security number or TIN. CalSavers will then contact them to customize their account, make savings elections, or notify them of what actions to take if they’re opting out. You are required to ensure that your account remains up to date.

If you will instead be using a separate eligible retirement plan, you are encouraged to report your exemption on the CalSavers website to let them know you are in compliance.

You will also want to let your payroll provider and your HR team know that you will be participating, so they have plenty of time to set up payroll deductions.

You must register, or acknowledge your exemption, by June 30. Failure to enroll in time will result in penalties of $250-$750 per employee.

How does it work?

CalSavers is a Roth IRA. Once you’ve registered, employees are automatically opted in to the program and are sent an invitation to set up their accounts. Upon enrollment, they have 30 days to choose to opt out. After 30 days, contributions are deducted from each payroll via bank transfer, and the money is added to the employee’s account and invested according to their selections. The default contribution is 5% of the employee’s gross income, but employees can change it.

You are responsible for setting up and facilitating the employee’s contributions from payroll. Answering your employees’ questions about the program, giving tax advice, and maintaining their accounts are not your responsibility.

After your policy is in place, new hires are eligible to participate from the first day they’re hired. You are required to upload their information to your portal within 30 days of hire.

Pros and Cons of CalSavers vs Private Plans:

CalSavers is free to employers and easy to enroll. It is opt-out, so employees are automatically enrolled with very little paperwork. There is (supposedly) easy access to support from the state if you have trouble. However, there are no tax benefits to the business or its owners, and no option for the business to match employee contributions.

Private plans can be selected and tailored to your business and can provide potential tax benefits to you and the business. Depending on your priorities, goals, and revenue, a private plan might be best for you, your business, or your employees.

You can find the entire Monthly CEO Advisory for June by Clicking Here. If you’d like to learn more about everything necessary to remain compliant as an employer, ABL can help. Book an appointment with us by Clicking Here.