As a small business owner in California, staying compliant with state mandates is crucial—not only to avoid penalties but also to foster a thriving workplace. One such mandate you should have on your radar is CalSavers, the state’s retirement savings program for employees. Here’s everything you need to know about CalSavers requirements in 2024.
What Is CalSavers?
CalSavers is a retirement savings program designed for employees who don’t have access to an employer-sponsored retirement plan. Employers facilitate the program, while employees contribute to their individual accounts through automatic payroll deductions. The funds are managed by a private financial firm contracted by the state, ensuring professional oversight.
Who Needs to Comply?
As of January 1, 2023, California expanded the CalSavers mandate to include employers with at least one employee. This means that if you have one or more employees and do not offer a qualified retirement plan, you are required to participate in CalSavers.
Important Deadlines
- Employers with 5 or More Employees: You have until December 31, 2024, to comply with the CalSavers mandate.
- Employers with 1 to 4 Employees: You have until December 31, 2025, to comply with the CalSavers mandate. This extension allows smaller businesses additional time to prepare for implementation.
How Does CalSavers Work for Employers?
Once registered, employers play a minimal but critical role:
- Registration: Sign up on the CalSavers portal. The process is straightforward and typically takes less than 15 minutes.
- Employee Roster Submission: Upload your employees’ information to the portal.
- Facilitating Contributions: Set up payroll deductions for participating employees.
Employers are not required to contribute to employees’ accounts or manage investment decisions. The program is entirely employee-funded.
What If You Already Have a Retirement Plan?
If your business offers a qualified retirement plan, you’re exempt from CalSavers requirements. However, you’ll need to certify your exemption by logging into the CalSavers portal and submitting proof of your existing plan.
Penalties for Noncompliance
Failing to meet CalSavers requirements can lead to financial penalties. The California Franchise Tax Board (FTB) imposes fines of:
- $250 per eligible employee if noncompliance extends past 90 days after receiving a notice, and
- An additional $500 per eligible employee if noncompliance continues past 180 days.
These penalties can quickly add up, so timely action is essential.
Benefits of Participation
While CalSavers is a mandate, it also presents benefits for your business:
- Employee Retention: Offering access to retirement savings demonstrates that you care about your employees’ financial futures.
- Ease of Administration: The program is designed to be simple for employers, reducing administrative burdens.
- Compliance Assurance: By registering, you avoid costly penalties and ensure compliance with state laws.
What Should Small Business Owners Do Next?
- Evaluate Your Options: Decide whether to offer a private retirement plan or enroll in CalSavers.
- Act Quickly: If CalSavers applies to you, don’t delay. Visit the CalSavers website to register or certify your exemption.
Communicate with Employees: Inform your team about the program, their rights, and how to participate. Transparency is key to a smooth transition.
