Preparing for the CalSavers Deadline

Key Takeaways

  • The fines and penalties for CalSavers and state mandates on retirement are significant.
  • There are two (2) options a business owner has when considering the best way to comply with state mandates on retirement.
  • Business owners that desire saving time and money while reducing their risk of penalty will want to consider their options carefully.. Considerations like the age diversity of the employees, average length of employment and average turnover should help determine which option to CalSavers is best.
  • Due to the time it takes to integrate payroll into CalSavers or a private retirement plan, acting fast is imperative if a business owner is going to meet the CalSavers deadline.

What is CalSavers?

CalSavers is a state-run program that provides California's private sector workers a retirement plan. Through the program, the millions of workers whose employers currently don't provide retirement programs can receive a Roth IRA. The plan mandates that any employer with 5 or more employees must offer a retirement plan.

The employer can find a retirement savings provider on their own or sign up for the CalSavers option. Any employer that fails to offer their workers a retirement savings program will face fines from the state. CalSavers is also open to self-employed individuals who wish to save for retirement.

For your employees, the CalSavers option offers automatic enrollment, though they can choose to opt out. Because it's a Roth IRA, the annual gross pay income limits remain relevant. If they'd prefer a traditional IRA, they can choose to make that switch.

Visit here to get the bottom line on CalSavers.

What are the penalties related to CalSavers and state mandates on retirement?

One of the most popular questions business owners are asking about CalSavers is, “What are the penalties related to CalSavers and state mandates on retirement?”

It’s a great question because the answer will most likely motivate a business owner to know their options to CalSavers. The penalties related to the state mandates on retirement are significant and charged per employee. Businesses with larger employee pools that are more diverse in age and turnover could be at a much higher financial risk than other businesses in the state. We will come back to this thought, but first, here are the penalties related to CalSavers straight from the government code:

Per Government Code Section 100033(b), each eligible employer that, without good cause, fails to allow its eligible employees to participate in CalSavers, on or before 90 days after service of notice of its failure to comply, shall pay a penalty of $250.00 per eligible employee if noncompliance extends 90 days or more after the notice, and if found to be in non-compliance 180 days or more after the notice, an additional penalty of $500.00 per eligible employee.

To put the penalties related to CalSavers in perspective, consider this. A business with 20 employees that is assessed the first round of CalSavers penalties at $250 per eligible employee (if noncompliance is found) would pay a penalty of $5,000.

And, if that business was assessed the second round of CalSavers penalties it would pay $500 per eligible employee for an additional $10,000 for a total of $15,000 of penalties related to CalSaver. Whooof, that is a lot of money that could have gone towards the retirement savings of the business owner or their employees.

Obviously, complying with the state mandates on retirement is probably a better option than paying fines so let’s look at which options a business owner has for complying with state mandates on retirement.

What are the options for complying with state mandates on retirement?

A business owner has two (2) options to consider when complying with state mandates on retirement.

  1. CalSavers. The state-run option. This is geared towards those who are either unable to set up their own private retirement plan or who choose not do so. Using CalSavers to comply with the state mandates on retirement requires the business owner to maneuver the state's CalSavers website and hotlines to register their business, their payroll and each of their employees as well as maintain this registration process as turnover of employees occurs.
  2. Set up a private retirement plan that complies with Calsavers and manages the compliance with state mandates for retirement.

Earlier we mentioned, businesses with larger employee pools that are more diverse in age and turnover could be at a much higher financial risk than other businesses in the state. As you can see by the options above, a business owner that has such a business and chooses to use CalSavers is most likely going to be spending a lot more of their time and effort managing this process.

As a business owner you will have to decide which is better for you: 1) Spend your time and energy to register your payroll and employees with CalSavers and maintain that process yourself as turnover occurs or 2) Outsource those tasks and possibly gain a valuable benefit for yourself and employees by offering a private retirement plan that will comply with the new law, saving you time and energy.

When it comes to private options, you have your pick of many. Each of them offers something different—but they won't all offer what you need. For small businesses, you might have to sort through a host of providers before finding want that meets your individual needs.

Want to explore the advantages of offering your employees a 401(k) benefit instead of the state retirement plan? Get started today.

Act Now, Time is of the Essense

The registration deadline for CalSavers is quickly approaching. Acting now is imperative for any business owner that plans on complying with the state mandates on retirement by the June 30, 2022 deadline. Though the mandate separates businesses with more than 5 employees and those with more than 50 employees, the deadline for both categories is the same. Once registered, you have 30 days to upload information about eligible employees.

It is important to remember that there is a process of registration and integration that needs to happen and payroll providers tend to be slow movers. Many business owners may find it will take 30-90 days to either set up their private retirement plan or integrate their payroll with CalSavers.

With the deadline for CalSavers quickly approaching, and with most business owners yet to act, there will undoubtedly be a rush of demand that could push these time frames out even further putting many business owners at risk of penalty for not complying with the state mandates on retirement.

Questions About the Calsavers Deadline?

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Meet Our Contributors
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Colby McFadden

Founder, Quiver Financial

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Justin Singletary

Director of Retirement Services,
Quiver Financial

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Patrick Morehead

Director of Alternative Investments,
Quiver Financial


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