Retirement Plans Required for Small Employers in California!

Have 5 or more employees? 

The State of CA says it’s time to have, or consider setting up, a retirement plan!

A law commonly known as CalSavers was passed in 2016 and requires employers to offer one of the following, by the deadline:

1. An employer-sponsored qualifying retirement plan.

• Qualifying retirement plans include:
  • 401(k), 401(a), 403(a) or (b), 408(k), 408(p), Union and Payroll deduction IRAs with automatic enrollment.

1. CalSavers.

• State-run alternative for employers who do not offer employees a retirement plan.

Deadlines by business size: 

Note that:

• Employers with 5 or more employees are next up to comply with the requirement.
  • This is employees receiving a check – full or part-time status does not matter.
    
• Penalties for non-compliance can be sizable. 
  • The State will send a notice to employers with an access code to register the employer’s status.
    • Employers need to respond if they have a qualifying plan or will use the State-run CalSavers plan.
    • State will send a flyer for distribution to employees. 
  • The penalties are:
    • $250 per eligible employee if noncompliance extends 90 days or more after the notice date. 
    • $500 additional per eligible employee penalty if noncompliance extends 180 days or more after the notice date.
• Employer-sponsored plan vs. CalSavers plan - there are pros and cons to each choice.

Next step? 

• Reach out to your Employee Benefits Advisor or Union.
  • They can assist with:
    • Discerning which best suits your organization’s and your employees’ goals.
    • Working through the compliance details.
    • Finding vendors that are plant-touching friendly.
• The CCIA risk management committee has members who are available to answer your questions.
• Employers can go to CalSavers.com at any time and register their employer-sponsored plan or indicate interest in the State-run option.