CalSavers Retirement Savings Program: What Small Businesses Need to Know
The CalSavers Retirement Savings Program is a new portable workplace retirement savings program for private sector workers whose employers are unable to offer their employees a way to save for retirement. CalSavers is run by the state and funded by modest employee contributions, so it involves minimal requirements for employers. Below is an overview of what small businesses need to know about the program.
What is CalSavers?
- CalSavers is a voluntary workplace retirement savings program being implemented by the state that enables small businesses and employees to make an automatic payroll contribution into a personal IRA retirement account overseen by the CalSavers Retirement Savings Investment Board.
- The program is designed to be self-sustaining, so there will be no taxpayer funding and no employer or state liability for the program.
How will CalSavers impact employers?
- Employers will not contribute to funds, manage funds or have any responsibility for financial advice. Employers must use their existing payroll system to send employees’ contributions to the fund each month.
- Small business owners support the CalSavers Program. Small Business Majority’s scientific opinion polling found two-thirds of small business owners in California support a state retirement savings program that would help small businesses and their employees save for the future.
- Many small businesses would like to offer retirement options to their employees—to help attract a talented workforce and boost employee morale—but can’t afford the overhead and administrative costs. CalSavers provides a way for small businesses employees to participate in a retirement program without incurring the associated burdens of employer-sponsored retirement programs.
- Nearly 80% of those who work for small businesses do not have access to a retirement savings option at work; meanwhile, the small business market is not being adequately served by the financial services industry. CalSavers helps serve an underserved population that wants to save for retirement.
What are the requirements for small businesses?
- Small businesses don’t need to do anything at this time to prepare, as the biggest businesses will be phased into the program first. When the program is fully operational, employers of five or more employees will be required to provide a retirement option, or enable their employees to make an automatic contribution from their paycheck into their CalSavers account.
- The administrative requirements for employers will be minimal, and employees will choose whether they want to participate or opt-out of the program.
- The three-year phase-in period is as follows:
- The self-employed will be able to opt in to the program in late 2019.
- Employers with more than 100 employees need to participate in a retirement program or CalSavers by July 1, 2020.
- Employers with more than 50 employees will need to comply by July 1, 2021.
- Employers with more than five employees will need to comply by July 1, 2022.
What businesses qualify for the program?
- The program does not apply to businesses that meet at least one of the following criteria:
- Have fewer than five employees.
- Already offer retirement plans.
- Small businesses owners with fewer than five employees, employees without a retirement option at work and the self-employed may choose to enroll in CalSavers. Once enrolled, they can link their bank to their CalSavers account in order to make and manage deposits into the program.
Where can I find more information?
- If you have questions about the CalSavers Program, please contact one of the following members of our team: