12 Sep California’s CalSavers Program Mandatory Registration
Employers with five or more California W-2 employees who do not offer retirement plans to their employees must register for California’s CalSavers program. Beginning in 2025, this threshold will drop to employers with one employee. Sole proprietors, self-employed individuals, or other businesses entities that don’t employee any individuals other than the owners of the business are excluded from this new requirement. If you currently offer a retirement plan to your employees you are exempt from registration.
New businesses that don’t offer a retirement plan must register with CalSavers within 24 months of the employer becoming an eligible employer (e.g., having five California W-2 employees).
If you do not offer a plan for your employees, you must enroll each of your employees in a CalSavers account unless the employees opt out. CalSavers accounts are Roth IRA accounts and are subject to contribution and participant income limits applicable to all other Roth IRA accounts. Employers are prohibited from making any contributions to these accounts, they are funded solely through the employee’s payroll contributions.
Once registered, an employer must provide an employee roster to CalSavers on their website and then CalSavers will contact the employees directly. The law does not provide any exceptions for short-term or part-time employees. So, any employee age 18 or older must begin funding the plan, or opt-out, by their first paycheck issued 30 days after the employee notification. Household employees are counted toward the employee threshold.
For employees who do not opt out, the employer must collect, remit, and report contributions for each payroll period. An employee’s initial default contribution rate is 5% the first year the employee is enrolled, increasing by 1% each year, up to 8%. Employees choose how their money is invested and have the option to:
- Opt out at any time; or
- Pay lower or higher contribution rates.
Employers who fail to comply with the program requirements are subject to a $250 per employee penalty after receiving a notice of noncompliance. The penalty is increased to $500 per employee if the employer does not comply within 180 days.
Employers do not have any liability for an employee’s decisions to participate in the program, for their investment decisions, or for the performance of those investments.
To register in the CalSavers program or to certify an exemption for your business, go to:
https://employer.calsavers.com/californiaertpl/enroll/createEmp/viewCollectEmpPreRegDetails.cs
If you have any questions, please contact us.