State-Run Retirement Savings Plan OK’d, Mandatory Enrollment Coming in 2020
California employers that don’t already offer a workplace retirement savings vehicle will be required to either begin offering one via private market or provide their employees access to CalSavers, a state-run retirement savings plan, as early as June 2020.
The CalSavers pilot program is open for employers to enroll; however, mandatory enrollment and contributions don’t go into effect until 2020. Employers can register now until the deadline but they don’t have to until their deadline.
Emergency regulations governing the CalSavers program were recently approved by the Office of Administrative Law.
CalSavers is the result of 2016 legislation enacting the Secure Choice Retirement Savings Program (SCRSP) for private sector workers whose employers do not offer a retirement plan.
The legislation requires employers with five or more employees that don’t offer specified retirement plans to put a payroll arrangement into place that requires employees to contribute a portion of their salary or wages to a retirement savings plan in the SCRSP, unless they opt out.
Employers that already offer a qualified retirement savings program will not be mandated to have their employees enrolled in the SCRSP. Employers retain the right at all times to set up and offer their own qualified retirement plan.
Registration Opens July 2019
According to the CalSavers website, employers can start registering on July 1, 2019. Compliance will be phased in over a three-year period based on the size of the employer.
The intention is that the employers’ responsibility is simply to act as a pass-through, where they deduct and submit contributions from employee wages.
The program will be funded by an automatic five percent payroll deduction, the default contribution determined by the Secure Choice Investment Board. Employers will be required to automatically deduct contributions from employee paychecks and to transmit payroll contributions to the program. The employer makes no contribution into the retirement account.
Employer Registration Deadlines
Deadlines for registering for the CalSavers program are as follows:
- Eligible employers with more than 100 eligible employees, and do not offer a retirement savings program, must register by June 2020.
- Eligible employers with more than 50 eligible employees, and do not offer a retirement savings program, must register by June 2021.
- All other eligible employers with five employees or more that do not offer a retirement savings program must register by June 2022.
The legislation provides employers with specified immunity from civil liability. However, employers are not shielded from federal liability should the program be determined to be subject to or preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA).