If your business has over 100 California employees, September 30, 2020 is the deadline to either register with (or certify as exempt from), the CalSavers Retirement Savings Program (CalSavers). You may have already received a notice about registering in CalSavers, or proving your exemption, with an access code and a notice that may be forwarded to employees.  To register with CalSavers or prove your exemption you will need your federal tax ID number and your California payroll tax number, as well as the access code provided in the CalSavers notice. The link to the CalSavers website to register or to claim exemption is https://employer.calsavers.com.

The following bullet points cover some last-minute questions that may still remain.

  • To count employees for purposes of the over 100 threshold, take the average number of employees that your business reported to EDD for the quarter ending December 31 and the previous three quarters, counting full- and part-time employees.   So, for example, if you reported over 100 employees to EDD for the quarter ending December 31, 2019 and the previous three quarters, combined, you would need to register your business with CalSavers on September 30, 2020.
  • If you use staffing agencies or a payroll company, or a professional employer organization, see my prior post on how this impacts your employee headcount.
  • If your business is part of a controlled group of corporations, a group of trades or businesses under common control, or an affiliated service group, and none of the member businesses maintains a retirement plan, then each component business must separately determine whether it is required to enroll by September 30 based on its employee headcount. If a retirement plan is maintained by the controlled group, the employer that sponsors the plan and any other members of the controlled group, etc. are exempt.

If You Are Exempt from CalSavers

  • If you have a retirement plan in place, including a 401(k) plan, SEP or SIMPLE-IRA, you should register as exempt, even if your retirement plan does not cover all of your employees.
  • If you are exempt you cannot auto-enroll employees who are not covered by your retirement plan. However, you may voluntarily notify employees that, if they enroll in CalSavers individually, your business will forward contributions to CalSavers for them.
  • In order for individual employees to enroll in CalSavers they must:
    • Be at least age 18
    • Have a bank account
    • Have either a Social Security Number or Individual Taxpayer Identification Number; and
    • Provide a residential address, and date of birth.
  • Once employees enroll individually in CalSavers they would need to notify your business of how much they want sent from their payroll to CalSavers and your business can forward those amounts manually or through a payroll provider.

If You Must Enroll in CalSavers

  • If you are subject to CalSavers, once you register, you must update your account on an ongoing basis by adding new employees who are eligible for CalSavers (aged 18 or above and receiving a Form W-2 from you) and by removing former employees who are no longer employed.  
  • You do not have to enroll employees in CalSavers yourself.  Once you register with CalSavers, enrollment is automatic.  Employees have 30 days after their hire/eligibility date to opt out.  
  • You can delegate CalSavers duties to your payroll provider, if the payroll provider is equipped to do so and agrees to do so.
  • CalSaver contributions are automatic (unless an employee opts out) and are equal to 5% of compensation.  They increase by 1% per year, up to 8% of compensation unless the employee makes a different election.
  • Contributions come out of employee pay.  There are no employer contributions required or permitted.
  • The funds are invested after-tax in Roth IRAs.  Investment of the Roth IRAs is managed by CalSavers and investment advisors who contracted with the state.  
  • Your business cannot be held liable over CalSavers investment losses.

Messaging, Penalties, Etc.

  • Your business must remain neutral about the CalSavers program and may not encourage employees to participate, or discourage them from doing so. You should refer employees with questions about CalSavers to the CalSavers website or to Client Services at 855-650-6918 or clientservices@calsavers.com.
  • There are penalties for noncompliance with CalSavers.  The penalty is $250 per eligible employee for failure to comply after 90 days of receiving the CalSavers notification, and $500 per eligible employee if noncompliance extends to 180 days or more after the notice.
  • A legal challenge to the CalSavers program as preempted by ERISA is still ongoing but it has not stopped the September rollout for large employers. Employers with more than 50 employees will need to register or prove exemption by June 30, 2021, and employers with 5 or more employees, by June 30, 2022.

The above information is a brief summary of legal developments that is provided for general guidance only and does not create an attorney-client relationship between the author and the reader. Readers are encouraged to seek individualized legal advice in regard to any particular factual situation. (c) 2020 Christine P. Roberts, all rights reserved.

Photo credit Tina Chelidze, Unsplash

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