All the way back in 2016, California passed legislation that employers who do not sponsor an employee-retirement plan must participate in a state-run retirement program. This program became known as CalSavers.

While there have been legal challenges to CalSavers, the program persists. The pilot phase of CalSavers launched in 2018 and the phase-in period started in 2020. CalSavers provides an opportunity for employees to defer wages, through payroll deductions by the employer, to a state-run individual retirement savings account program. An employer is not required to participate in CalSavers if it sponsors or participates in a retirement plan such as a 401(k) plan or pension plan. In order to be exempt from CalSavers, an employer may sponsor a retirement plan for any of its employees; California employees need not be covered by the retirement plan in order for the employer to be exempt.

Last year, employers with over 100 employees received a small reprieve and had their deadline to adopt a retirement plan and file an exemption or enroll in CalSavers, extended to September 2020. However, to date, employers with 50 or more employees still have a deadline of June 30, 2021, and employers with 5 or more employees have a deadline of June 30, 2022.

Employers who fail to comply with the requirements of the California mandate may be fined by the California Franchise Tax Board. As such, it is important for employers with employees in California to either adopt a retirement plan and file an exemption or register with CalSavers in order to ensure they are in compliance by the applicable deadline.