A State-Sponsored Retirement Plan Is On The Horizon
Posted December 17, 2018

Back in 2016, SB 1234 created the “California Secure Choice Retirement Savings Program,” a state-managed retirement savings program (the CalSavers Program) for private-sector employees whose employers do not already provide a retirement savings program. The program was meant to apply to almost all private sector employers that have five or more employees (and who do not offer a retirement savings program). Specifically, the CalSavers Program allows employees to save for retirement through a state-operated Roth IRA.

Although the law was initially slated to become effective January 1, 2018, implementation stalled out when litigation ensued between California and the federal government over whether the federal ERISA laws preempted state implementation of a retirement program. The wait appears to be over. In the very near future, employers who do not offer retirement savings plans to their employees will be required to register with the CalSavers Program as follows:

  • Voluntary registration for employers of all sizes: June 1, 2019;
  • Mandatory registration for employers with more than 100 employees: June 30, 2020;
  • Mandatory registration for employers with more than 50 employees: June 30, 2021;
  • Mandatory registration for employers with more than 5 employees: June 30, 2022.

Note that as of November 2018, voluntary CalSavers registration is open through a pilot program, and registration can be completed at: https://www.calsavers.com.

Also noteworthy, there are no fees for employers to facilitate the program, and employers are not required to make contributions to the state-sponsored plan. Instead, the employer’s role is that of a facilitator – registering with the state, and then facilitating the program by submitting employees' contributions; that’s it.

According to the CalSavers website, once an employer registers, the employees will be automatically enrolled into the program within 30 days. The default contribution rate is 5% of the employee’s pay, though employees can change their rate at any time. If an employee does not wish to participate, the employee must affirmatively opt out.

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