The deadline for California’s largest private-sector employers to either register for, or opt out of, the CalSavers Retirement Savings Program is quickly approaching.
As we explained in a previous Client Alert, CalSavers is a new, automatic enrollment payroll deduction IRA program, designed to expand access to workplace retirement savings programs. Under state legislation passed in 2016, employers with five or more employees will be required to offer a qualified workplace retirement savings plan via the private market or provide their employees access to CalSavers.
Since our last Client Alert, the deadlines to register for CalSavers or opt out have changed. The new deadlines are:
- September 30, 2020 (extended from June 30, 2020) / Employers with 101 or more employees
- June 30, 2021 / Employers with 51-100 employees
- June 30, 2022 / Employers with 5-50 employees
Employer Obligations: Register or Opt Out
Before the applicable deadline, California employers that do not already offer a private-market qualified workplace retirement savings plan must either (1) begin offering one or (2) register for CalSavers.
Exempt employers—i.e. those that currently offer (or will offer) a qualified plan—are not required to register for CalSavers. However, they must still “opt out” of CalSavers by certifying their exemption before the compliance deadline.
Qualified private-market retirement plans include: 401(a), 401(k), 403(a), 403(b), Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE), and payroll deduction IRAs with automatic enrollment.
Employers that fail to register by their applicable deadline without good cause will be subject to a penalty of $250 per eligible employee for noncompliance, extending 90 days or more after receiving notice of their failure to comply.
Employers will be subject to an additional penalty of $500 per eligible employee if they are found to be noncompliant 180 days or more after receiving notice of noncompliance.
Employers can begin registration for CalSavers or certify an exemption here.
Post-Registration Information, Ongoing Employer Responsibilities
Within 30 days of registration, employers must upload a roster of their eligible employees to the CalSavers website. Employers must begin sending payroll contributions to the State no later than the first payroll period 30 days after they upload their employee rosters. During the 30 days after an employer uploads its employee roster and any time thereafter, employees can opt out of the program or customize their account by setting their own contribution rate and choosing investments.
Employers will deduct a percentage of enrolled employees’ wages and forward those amounts to the State, and the State will maintain employee accounts. Employers have an ongoing obligation to provide updated information when employees leave or join their companies. Employers may not advise employees to enroll or not enroll in CalSavers, nor are they permitted to take any action related to the administration or operation of the program—e.g. employers may not make contributions to CalSavers (including matching contributions), select which investment options will be made available, or determine the terms of IRAs offered through the program.
Employers are not required to pay any program-related fees or match employee contributions. Nor are they responsible for disseminating program information, answering employee questions about the program, managing investment options, processing distributions, or managing changes to employee accounts. State law exempts employers from liability for an employee’s decision to participate in CalSavers, for investment decisions, and for the performance of those investments.