According to California law, all business owners have to give their employees access to a savings...
Employers in California often have questions about their responsibilities regarding CalSavers, the state's retirement savings program. Below, we answer some frequently asked questions to help employers navigate the CalSavers program efficiently.
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Mandatory Participation: Who Needs to Facilitate CalSavers?
As an employer in California, you may wonder if you're obligated to facilitate CalSavers. The answer lies in state law: if you don't offer your retirement plan, you must facilitate CalSavers. This requirement applies if you employed an average of one or more California-based employees in the previous calendar year, with at least one employee aged eighteen or older, and do not sponsor a qualified retirement plan.
Qualified retirement plans include various options such as 401(k) plans, 403(b) plans, SEP plans, and more. If you already offer a qualified retirement plan and have received a notice to register, you can inform CalSavers of your exemption through the employer portal. It's important to note that religious, tribal, and government organizations are exempt from this requirement.
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Registration Deadlines: When Must Employers Register?
The registration deadlines for employers vary based on the number of employees they have:
Employers with 5 or More Employees:
Employers with an average of five or more employees are mandated to register with CalSavers. This mandate is assessed annually using employee data submitted to the Employment Development Department (EDD). The registration deadline for these employers is typically December 31st.
Employers with 1-4 Employees:
Recent legislation has expanded the CalSavers mandate to include employers with at least one employee. Starting January 1, 2023, employers with 1-4 employees can register with CalSavers, with a registration deadline of December 31, 2025. However, businesses with no employees other than owners remain exempt from this expansion.
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Penalties for Non-Compliance: What Happens If Employers Fail to Comply?
Non-compliance with CalSavers requirements can result in financial penalties for employers. According to Government Code Section 100033(b), eligible employers failing to allow their eligible employees to participate in CalSavers may face penalties of $250 per eligible employee after 90 days of noncompliance. If noncompliance extends to 180 days or more after notice, an additional penalty of $500 per eligible employee may apply.
Employers may also incur penalties for failure to register before the deadline or for failing to complete other necessary actions, such as uploading employee information and submitting employee contributions within the specified timeframes
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Employee Eligibility and Participation: Who Can Participate in CalSavers?
All employees of a participating employer are eligible to participate in CalSavers if they are at least eighteen years old and have employee status under California law. No minimum requirements are based on hours worked or tenure with the employer.
Employees become eligible to participate from their first day of employment, and participating employers are required to upload employee information to the portal within 30 days of their hire date. However, employee contributions to the program begin with the first payroll following the 30-day notification decision period.
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Employee Information Disclosure: What If an Employee Doesn't Want Information Disclosed?
Employers facilitating the CalSavers program are legally required to provide information on all eligible employees to the program. However, it's essential to reassure employees that their data is protected. The program administrator and recordkeeper are the only entities with access to employee personal data, and they adhere to strict privacy policies and employ high-level security measures to safeguard this information.
By understanding these frequently asked questions, employers can ensure compliance with CalSavers requirements and provide valuable retirement savings opportunities for their employees. If you have further questions or need assistance, don't hesitate to reach out to CalSavers for support.
Stick around for Part 2 coming next month and learn more about this great program. Don't forget to contact a TPG CalSavers Specialist for more questions, call us at 909.466.7876 today!
Also, read about The Pros and Cons of CalSavers or find out What Suits Your Business Best, Calsavers or 401(k)? Find these articles and more by visiting our blogs/resources page.
