Senior retirement program

CalSavers 101: California’s New Retirement Savings Program

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CalSavers is a qualified retirement plan that allows millions of workers in the private sector to save for their future. This program is available to workers

  • whose employers don’t offer a workplace retirement plan
  • are self-employed
  • are looking for ways to save for their retirement

CalSavers doesn’t mandatorily require employees’ participation, and the employees can opt out anytime they wish to.

What is the employer’s role in CalSavers?

The program is funded by the employees’ savings, without any need for employer fees or contributions. It is administered by privately held financial services firms and overseen by a public board chaired by the State Treasurer. All that the employer needs to do is:

  • Upload required employee information to CalSavers
  • Deduct employee’s contribution from their payroll and submit it to CalSavers

What makes CalSavers a simple, low-cost way to save for retirement?

Perhaps, the best thing about CalSavers is that it allows for easy, automated enrollment with simplified investment and low fees. Workers contribute to a portable Roth Individual Retirement Account (IRA) , meaning they can keep the account even if they switch jobs. Also, employees can either choose their own saving rates or stick to standard plans. They can also back out of the plan at any time.

Thus, employees can invest in high-quality mutual funds and other investment options, whose value will change depending on market conditions. Interested workers can choose to invest in:

  • Money Market Fund
  • Core Bond Fund
  • Global Equity Fund
  • Target Retirement Date Fund
  • Environmental, Social, and Governance Fund

How much does it cost to invest in CalSavers?

Depending on the investment plan chosen, the cost will range from $0.83 – $0.95 per year for every $100 in the employee’s account. The costs so paid is used to cover:

  • Administration expenses
  • Underlying fund expenses
  • Asset-based fees

Do employers need to register for CalSavers mandatorily?

After June 2022, all California employers with five or more W-2 employees must provide a qualified retirement savings plan to their employees. Failing to do so will attract financial penalties as follows:

  • penalty of $250 per eligible employee for noncompliance extending 90 days or more after the notice
  • additional penalty of $500 per eligible employee for noncompliance extending 180 days or more after the notice

If you have any questions about employee benefit programs in California, reach out to our experts at  Hoffman Brown Company today!