By Adam Nathaniel Arce
In California, employers who do not sponsor a qualified employee retirement plan are required to participate in the California run program known as CalSavers, which can be found at the following link: www.calsavers.com.
There are certain upcoming deadlines relating to CalSavers that employers need to know to avoid incurring penalties.
Does CalSavers apply to my Company?
Currently, only employers with 5 or more employees in the previous year are required to have a retirement plan or register with CalSavers. Employers who fall under this category were required to have a plan in place by June 30, 2023.
However, in 2022 California passed additional legislation expanding the CalSavers requirements to employers with at least 1 employee. Employers with at least 1 employee can register for CalSavers as of January 1, 2023. Employers with 1 to 4 employees have a deadline to register for CalSavers by December 31, 2025.
What if my Company already has a retirement plan?
CalSavers does not require companies to obtain retirement benefits through CalSavers. Employers are exempt from the CalSavers requirements so long as the Company has a “qualified” retirement plan, including but not limited to:
- 401(a) – Qualified Plan (including profit-sharing plans and defined benefit plans)
- 401(k) Plans (including multiple employer plans or pooled employer plans)
- 403(a) – Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
- 408(k) – Simplified Employee Pension (SEP) Plans
- 408(p) – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA Plan
- Payroll deduction IRAs with automatic enrollment
However, even if your Company has a retirement plan, the Company will still need to create an account with CalSavers and apply for an exemption. Employers who do not complete this step risk incurring penalties from the State of California. Employers who are not in compliance will face a penalty of $250 for each eligible employee, and if they fail to come into compliance within 90 days, they will pay an additional fine of $500 for each eligible employee.
The deadline to request an exemption for having a qualified plan was June 30, 2023. However, California has indicated they are offering a 90 day grace period before sending out compliance notices. An employer has 90 days from the date of the notice to come into compliance, request an exemption for a qualified retirement plan, or receive a fine. If your Company has not yet applied for an exemption through CalSavers, it should do so as soon as possible.
What if my Company does not have a retirement plan?
Employers with 5 or more employees within the previous year are already required to have CalSavers or offer a retirement benefit. If your Company had 5 or more employees in 2022, and you do not have a qualified plan or CalSavers, you should apply for CalSavers or obtain a qualified retirement plan as soon as possible. Employers established in 2023 have until December 31, 2023, to establish a qualified plan or sign up for CalSavers (unless they have 1-4 employees, in which case they have until December 31, 2025).
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Ferber Law is available to help answer questions relating to the California CalSavers requirement.