What You Need To Know About CalSavers

what is calsavers

What Is CalSavers?

CalSavers is California’s new retirement savings program for private-sector workers who do not currently have another way to save for retirement at their job. CalSavers accounts are Roth IRAs that are funded by employee contributions. The program requires employees to participate unless they take proactive action to ‘opt-out’.

Employees who do not opt out of the program must be automatically enrolled.  Your company is required to perform the administrative duties needed to deduct and forward employee contributions to CalSavers.  California employers should understand how CalSavers works, the requirement to register, how CalSavers compares to a 401(k) plan and the ability to claim an exemption from CalSavers.


Who is Eligible?

Any employee of a participating California employer;
Who is at least age eighteen and;
Has the status of an employee under California law, or
Receives an IRS Form W-2 with California wages, or
Is a sole proprietor or partner in a partnership
And qualifies to make a Roth IRA contribution


Automatic Enrollment for Employees

If your employees do not opt out of CalSavers, they will be automatically enrolled. If they don’t choose their own rate, the standard savings rate of 5% will be deducted from their paycheck each pay period on an after-tax basis. Also, CalSavers has an automatic increase feature that will increase their savings rate by 1% each year until their savings rate reaches 8%, unless they choose otherwise.

CalSavers will have an open enrollment period every two years during which employees that previously opted out will have to opt-out again. If they don’t, they will be automatically enrolled in the program.


When Should You Register Your Company?

If your company has more than 100 employees, you must register by or before June 30, 2020
If your company has more than 50 employees, you must register by or before June 30, 2021
If your company has 5 or more employees, you must register by or before June 30, 2022

CalSavers allows eligible employers to join at any time prior to their registration deadline.


Employer’s Penalties for Non-Compliance

Employers are required to register in time to process contributions from every employee’s paycheck by the above registration deadlines. If you do not facilitate the required employee contributions, the State of California assesses a penalty of up to $750 per eligible employee. So, if you have 100+ employees, you could face penalties of $75,000 or more!


How Does CalSavers Compare To A Traditional 401(k) Plan?

calsavers vs 401k


Is Your Company Exempt From Participating in CalSavers?

If your company sponsors one of the following types of retirement plans, you can claim an exemption from CalSavers.

Simplified Employer Plan (SEP)
Defined Benefit or Cash Balance

Click here to download instructions on how to register your company with CalSavers then take the additional steps needed to certify your exemption from CalSavers.


Still have questions or concerns?

Contact 401(k) specialist Mark Laughton, mark@quintes.com or 831-601-1710