CalSavers registration deadline is approaching
Amit Chandel
I help business owners to achieve financial goals by minimizing taxes | Award winning Author | 2017 Tax Planner of the year
The CalSavers program is a state-administered Roth-like retirement plan that’s available to California employees who are working for businesses that don’t offer a retirement plan. Employers who already offer a retirement plan to their employees are exempt, which means they’re not required to enroll their employees. As a matter of fact, they cannot enroll their employees in the program.
Nonexempt employers with more than 100 employees were previously required to register by September 30, 2020, and nonexempt employers with more than 50 employees were required to register by June 30, 2021.
June 30, 2022, is the registration deadline for nonexempt employers with more than five California W-2 employees, at least one of whom is at least age 18.
If a nonexempt employer fails to register for the program, significant penalties can result.
How to register
The CalSavers program will notify employers via letter of their requirement to register in the program. The letter contains an access code and directs them to the website where they can register. The employer can request their access code on the website if they didn’t receive their notification letter or if they lost the code.
When the employer registers (or shortly thereafter), they will need to enter an employee roster into their CalSavers account, to provide basic employee information like name, address, phone number, e-mail address (if available), and external payroll ID. This can all be done on an Excel spreadsheet. An employer will also have to update the roster to enter information for employees hired after the initial roster is submitted. Within 30 days of entering the employee list, the employer will begin to collect, remit, and report contributions for each payroll period.
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Employee options
CalSavers will contact the employees directly to determine whether the employee will opt out, and if not, what their contribution rate will be. The contribution has to be a percentage rate, rather than a fixed dollar amount. If the employee doesn’t respond to CalSavers, they’ll be automatically enrolled with a 5% contribution rate. We recommend that employers also reach out to their employees to let them know about the need to opt out if they don’t want to be enrolled.
An employee’s initial default contribution rate is 5% for the first year they’re enrolled, increasing by 1% each year, up to 8%. Employees choose how their money is invested and they can opt out at any time or pay lower or higher contribution rates. This means employers will likely be applying different contribution rates per employee.
It’s also up to the employee to determine if they’re eligible to participate in the program. For example, if they already have an IRA or other retirement plan, then the employee needs to determine whether participating in CalSavers will put them over their contribution maximum for the year.
Making the contributions
The amount of the contribution rate for each employee will be posted on the employer’s portal on the CalSavers website. Any changes to the contribution rate will be e-mailed to the employer by CalSavers. Employers will need to go onto their account page each pay period to confirm the contribution percentage for each participating employee.
Would you like to explore other options than CalSavers call (562) 281-1040.