The state of California created the CalSavers program in 2016, which requires eligible employers that do not sponsor a qualified retirement plan to participate in the CalSavers Retirement Savings Program. The purpose of the program is to ensure that all California workers can save for retirement through automatic payroll contributions.
Currently, state law requires eligible employers with 5 or more employees to participate in the program if they do not already sponsor a qualified retirement plan. However, by December 31, 2025, the mandate will include employers with at least one employee.
Employers should have already begun receiving official registration information via US mail and email. If you have not received your information, you can register or request an exemption at the CalSavers website.
Registration is required unless the company meets one of the conditions for exemption:
- It sponsors a qualified retirement plan
- It was closed or was sold
- It does not have any employees other than the owner(s)
- Its classification is either a government entity, a religious organization, or a tribal organization
Read on through Frequently Asked Questions for answers that affect all employers, regardless of size.
What is CalSavers?
CalSavers is a program sponsored by the state of California to ensure all Californians are able to save for their retirement through automatic payroll contributions. It is designed to be as easy as possible for the employer. The employer’s role is to add and maintain their employee roster, deduct the employee contributions from their paychecks, and submit them to CalSavers so they can be added to the employees’ retirement accounts. There are no employer fees and the employer does not make contributions to the employee accounts.
What happens after I enroll in the program?
Once an employee’s name and contact information are added to the CalSavers website, an email from the program administrator is sent directly to the employee. This email will contain information on how the employee can set up their account and set the amount of the contribution they want to make from their paychecks. It also informs the employee that if they do not opt out within 30 days, they will be automatically enrolled at 5% of their salary with a 1% increase to their contributions each year until they reach 8% of their salary.
Employees are able to opt out by accessing their CalSavers account, by calling the automated phone number listed in the email, or by completing a paper opt-out form. They may also make future changes to their contributions or their investments, or opt-out or in by accessing their CalSavers account.
Contributions can be invested in various funds, including the option of a Target Retirement Fund. More information about the investments can be found on the investments section of the CalSavers website.
The contributions are made after taxes and are invested in a Roth IRA, which means employees don’t pay taxes on their contributions when they make a withdrawal. Earnings on their contributions may also be tax-free if they meet certain IRS criteria. The account is portable, and the employee keeps it even if they leave their current job. More information about the program can be found on this CalSavers flyer, which can be distributed to employees.
Who is an eligible employer?
An eligible employer has been updated to include those that have an average of 1 or more employees in the state of California throughout the previous calendar year. Both full-time and part-time employees are counted for purposes of calculating the number of employees.
On August 26th, 2022, Governor Newsom signed SB 1126. This bill clarifies that an eligible employer excludes sole proprietorships, self-employed individuals, or other business entities that do not employ any individuals other than the owners of the business. SB 1126 also expands the definition of eligible employers to include those that have at least one employee. The deadline for newly eligible employers, those with one but less than five employees, to enroll in the program is December 31st, 2025.
If I don’t sponsor a retirement plan for my employees, what do I need to do?
If you are an eligible employer but have not already, you should immediately register with the CalSavers program. You will need your Federal Employer Identification Number or Tax Identification Number (EIN/TIN) and your CalSavers Access Code. You would have received your Access Code in emails and letters that were sent to you by CalSavers. If you do not have the Code, you can request it on the employer section of the CalSavers website.
Are there penalties for not complying?
Yes, an eligible employer who does not sponsor a retirement program and who does not participate in CalSavers will be given a notice, and if they still do not comply within 90 days of the notice, they will pay a penalty of $250 per eligible employee. If they have still not complied after 180 days, an additional penalty of $500 per eligible employee will be assessed. The state has said that it has begun enforcement actions and will be reaching out to non-compliant employers in the near future.
