What is CalSavers?
CalSavers is the California State Treasury’s answer to those who don’t have a way to save for retirement at their place of employment. It’s a savings program designed to help millions. It was created and passed by the state in 2016, and required that California employers who do not have a dedicated retirement plan must participate in CalSavers.
This program is an automatic enrollment individual retirement account, or IRA, and has no employer fees or fiduciary liability. CalSavers is operated by private sector financial firms that receive oversight from a public board chaired by the California State Treasurer.
I’m an Employer, what is my level of responsibility?
Good news! There is no employer fee for participating in the program. It is the responsibility of each individual employee to monitor their own IRA accounts. CalSavers does intend to alert employees when their CalSavers account is close to reaching the federal annual contribution limit.
However, you, as an employer, are responsible for registering for the CalSavers program, and making sure you provide an employee roster to the program for eligible employees. That roster should include basic info like name, DOB, SSN and contact information. You’re also responsible for facilitating via payroll the appropriate deductions each pay cycle. *An important note, you must participate in CalSavers if you have more than 5 employees and do not offer a retirement package.
The deadlines for eligible employers are as follows:
- If you’re an employer with more than 100 employees, the deadline was September 30, 2020.
- If you’re an employer with more than 50 employees, the deadline is June 30. 2021.
- If you’re an employer with 5 or more employees, the deadline is June 30, 2022.
If you missed the first deadline, contact CalSavers right away to avoid any penalties.
I’m an Employee, what is my responsibility?
You will be responsible for monitoring your own IRA account that you contribute to, as well as determining if you are eligible to contribute to a Roth IRA, and to comply with IRA rules. Don’t worry, CalSAvers will provide you with educational materials to help participants understand. If you’re still struggling, reach out to us at ACap!
This year, the annual contribution limit is $6,000 for individuals under 50 years of age. If you’re over 50, you’ll be able to contribute an additional $1,000 for a total of $7,000.
If you work for more than one employer, don’t worry. You are invited to enroll in the CalSavers program for each place you work. You can choose to opt out of the contributions through an employer, or contribute through multiple employers at the same time. As mentioned above, It is your responsibility to monitor the contribution amount across all your IRAs to make sure you don’t violate limits. You can make changes to your account at any time by logging into your CalSavers account.
As an Employee, do I have any fees?
There is a small fee, which is an administrative charge for the program that is an asset-based fee of approximately 0.825% to 0.95%, depending on your investment choice. This means you will pay between $0.83 and $0.95 per year for every $100 in your account. Don’t worry. There will be no bills, this charge is automatically taken out of your CalSavers balance on a regular basis. It’s basically to help pay for the administration needed to keep the program running.
Do I have to wait to enroll?
No! Eligible employees who choose CalSavers will be automatically enrolled into the program 30 days after their hire date (or date of eligibility). If you’re concerned about vesting, contributions belong 100% to the contributing participant from day one.
I’d like to enroll individually, is that permitted?
Yes! To be eligible for enrollment as an individual, meaning not through your employer, you must have earned income, be at least 18 years of age, have a bank account set up for your contributions, and provide your full name, SSN, address and DOB.
There’s a lot to unpack here. If you need help with your IRA or any retirement and wealth management services, contact ACap today!
Looking for an independent fiduciary financial advisor who can advise you on investments, retirement, real estate, alternative assets, and taxes? Contact ACap Advisors & Accountants to schedule a free initial consultation. Our clients include individuals, small businesses, entrepreneurs, and anyone serious about saving and investing for their future.
