For California, if you are a for-profit or non-profit employer, and have at least 5 part or full time employees, you must now provide a qualified retirement vehicle, like a 401(k) or SIMPLE IRA.
CalSavers Retirement Program
What is CalSavers?
CalSavers is a new California state-run ROTH IRA program for private-sector employees who do not receive retirement benefits from their employer. Historically, employers have not been legally required to offer retirement benefits, but certain states, including California, have recently passed legislation mandating it.
Why CalSavers?
CalSavers started because nearly half of Californians are forecast to fall into economic hardship upon retirement and half have no retirement assets, according to UC Berkeley Labor Center.
Deadlines
CalSavers Law stipulates employers must register in the CalSavers Program by certain dates, according to company size:
- If you have more than 100 employees = June 30, 2020
- If you have more than 50 employees = June 30, 2021
- If you have 5 or more employees = June 30, 2022
CalSavers vs. your own retirement plan
Any retirement plan is better than no retirement plan. That being said, here are drawbacks in a CalSavers plan versus offering your own retirement plan:
| CalSavers | Your own retirement plan | |
|---|---|---|
| Employer contributions | Employers can not contribute to employees’ CalSavers account | Clients customize contributions and matching |
| Investment menu | Employers can not manage investment options with CalSavers | Clients customize investment options |
| Investment choice | Savers can choose from a simple menu of investment options at any time. Under the default investment option, the first $1,000 of employee contributions are invested in a money market fund and any subsequent contributions are invested in a target retirement fund based on saver age. | Clients access thousands of bond and equity funds and take more control of their investments with a self-directed brokerage option |
Other CalSavers plan terms
- All money is immediately vested meaning limited options in presenting qualified retirement planning customizations like profit sharing incentives
- The total annualized asset-based fee, including investment fund fees, ranges from 0.825%-0.95% depending on investment chosen
- If employers don’t opt-in or out within 90 days of the deadline, and start their own retirement plan, a failure to comply notice will be issued and employers will face a penalty of $250 per eligible employee.
Sounds pretty intimidating?
It’s not. At McClure Wealth, our financial advisors and wealth planners can get your company started with a qualified 401(k), IRA, SEP, or Multiple Employer Plan right away. Clients customize contributions, matching, eligibility, auto-enrollment, investment options, and take more control of their investments with a self-directed brokerage option. Our clients access thousands of bond and equity funds, without being limited to just four to the four provided with CalSavers.
Offer your employees a customized and competitive retirement plan that helps with retirement planning, taxes, employee retention and satisfaction.
Whether you are 5, 500, or 5,000 employees, don’t wait until the deadline to offer your employees a retirement plan that fits your company needs.
Get in touch with us to learn more about how we work with actuaries and business owners to understand just the right retirement plan design to be competitive, have the most flexibility, and investment options.
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