Published date 3/31/22. Refer to the Cal Savers website for up-do-date requirements.
California is requiring all employers to have a company sponsored retirement plan by summer 2022. In order to help you decide what’s right for your small business, we have prepared this information.
In summary, if you meet the 5 employee minimum, you will be required to allow employees to voluntarily participate in a retirement plan through payroll deductions. That means you will give them options to choose their deduction amount, and then as an employer, you will remit those amounts to the plan after every payroll.
Note that, you must have the system automatically enroll all employees. That’s a requirement. Employees have to opt out.
The good news is, at Pink Payroll software, we can easily set up the payroll side for you.
You need to set up the Cal Savers side. Or, you can set up a 401k or something else.
Here is the information you need to know:
What is CalSavers?
The CalSavers Retirement Savings Program was created by state law to ensure all California workers can save for retirement through automatic payroll contributions facilitated from their workplace.
Who is an eligible employer?
If you have at least 5 California-based employees, at least one of whom is age eighteen, and you don’t sponsor a qualified retirement plan, your business is required to register for CalSavers. State law requires employers to either offer their own retirement plan or register to facilitate CalSavers.
Do I have to use the state-sponsored CalSavers Plan?
No. Registering for the CalSavers program is one way to fulfill the requirement that every qualified employee in California have access to a retirement plan. Businesses can also establish their own employee retirement plan, such as:
Individual IRAs - Payroll deduction IRAs with automatic enrollment
401(a) – Qualified Plan (including profit-sharing plans and defined benefit plans)
401(k) plans (including multiple employer plans or pooled employer plans)
403(a) - Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
408(k) - Simplified Employee Pension (SEP) plans
408(p) - Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA Plan
If you already offer a qualified retirement plan above, please inform CalSavers of your exemption on the employer portal.
What is the Cost for These Plans?
Cal Savers - no cost to the employer in terms of matching contributions or administration costs like you find with a 401k. There is a time cost for you set this up.
Individual IRAs - no cost, but you will have to figure out how to get it to fit the Cal Savers rules of automatic enrollment.
The 401, 403 and 408 plans all require some administration. So, there will be fees of around $1500 to $3000 per year
How to Get Started with an Individual IRA
If you aren’t going to choose a plan that you as the employer matches or provides additional contributions to, then the easiest way now is likely to use the Cal Savers plan.
That is because they have the system to automatically enroll all employees. That’s a requirement. Employees have to opt out.
Here are Important Resources Provided by Cal Savers:
Employer Resources
https://employer.calsavers.com/home/employers/resources.html
Employer Guided Support
https://employer.calsavers.com/home/employers/support.html
Employee Resources
https://saver.calsavers.com/home/savers.html
Training Materials
In the interests of making this as easy as possible for you, we are creating instructions and online information for you. If you have a question, our staff will respond with various training info we have created that we think will get right to the point.
We understand this is an extra burden on you as an employer. And, for us as a payroll company, we need to provide as much easy self-service information as possible to provide “free” and easy self-service for you.
As always, our staff will guide you on the payroll end to make it easy and enjoyable as possible.
How to Get Started with Cal Savers
STEP 1 - REGISTER HERE: https://employer.calsavers.com/home/employers/program-details.html?language=en# (Easy step by step registration process here)
*When you register – please list Pink Payroll as your payroll provider with email payroll@pinkpayroll.com. However, this does not mean that we log in and do anything. You will need to go through our options to see how your payroll reports can be uploaded and sign an agreement with us for us to do this. We all need to know our responsiblities before proceeding. We will get you those options.
STEP 2 – ENTER EMPLOYEE INFO
Enter all of your employees into the CalSavers portal, after you finish registering your account. Each employee will receive a welcome email, in which they have 30 days to opt out. If they don’t opt out, deductions start at a default rate of 5% of eligible wages.
STEP 3 – ADD YOUR COMPANY BANK ACCOUNT FOR THE CONTRIBUTION PAYMENT.
Enter a routing and accounter number, and save.
STEP 4 – ADD THE PAYROLL REPORTING SCHEDULE TO YOUR CALENDAR
Cal Savers has provided a calendar sync tool, which we think looks pretty helpful. If you want, use that to add to your google or other calendar. This will remind you when it's time to either remit the payments, or check to be sure they were made.
STEP 5 – REPORT EACH PAYROLL, and CONTRIBUTIONS ARE DEDUCTED
After every payroll, someone you designate will report the contributions. The details to do this will be shared with you soon by Pink Payroll.
They are:
1 - Type the info online on the Cal Savers site (no training needed, you can do now)
2 - Upload a file yourself with an excel or similar document
3 - Pink Payroll uploads a file for an administrative fee
4 - We may use the file transfer system (ftp) for a fee, as there is maintence
STEP 6 – ONGOING MAINTENANCE
1 - Set a reminder to verify the employee deposits are comleted accurately. Even if you engage us or a bookeeper, you need to verify this is done for your compliance
2 - Update employee deduction changes in the payroll software
3 - Add and remove employees from the Cal Savers system
FAQs:
These are our interpretations of the CalSavers rules as of 3/31/22. Please refer to the Cal Savers site for any updates or changes.
When are employers required to take action?
The deadline for registering for a CalSavers Account is:
For eligible employers with more than 100 employees, (PASSED) September 30, 2020.
For eligible employers with more than 50 employees, (PASSED) June 30, 2021.
For eligible employers with five or more employees, June 30, 2022.
How do I calculate the number of my CA employees?
Your eligibility and compliance deadlines are based on your average employees throughout the previous calendar year. This number is calculated by averaging the numbers of employees you report to the Employment Development Department on your previous four DE9C filings for the prior year.
Which employees are eligible?
All employees of a participating employer are eligible as long as they are at least age eighteen and have the status of an employee under California law. There are no minimum requirements based on hours worked or tenure with their employer.
Employees are eligible to participate in CalSavers from the first day they are hired. Participating Employers are required to upload them to the portal within 30 days of their hire date.
Can my employees opt out of Cal Savers?
YES - When you register, you’ll submit information for each eligible employee. This will begin the automatic enrollment process.
Employees will then have 30 days to decide to participate or opt out. If they do not make a selection, they will be auto-enrolled in the program.
What employers ARE responsible for:
Employers serve a limited role: facilitate the program by adding and maintaining their employee roster, deducting the correct amount from the employee’s paycheck, and submitting contributions after each payroll (or by direct deposit).
What Employers are NOT responsible for:
Answering questions about the program
Managing investment options
Processing distributions
Giving investment/tax advice
Fiduciary responsibility
There are no employer fees by Cal Savers or employer matches under this program.
What Pink Payroll is NOT responsible for:
Setting the program up in the payroll software unless asked in writing by the employer to do so
Setting up and editing individual employee deductions, that is the employer responsibility
Answering questions about the program to employers or their employees
Managing investment options
Processing distributions, unless asked and agreed to in writing
Giving investment/tax advice
Fiduciary responsibility
Additional Facts:
Employees will be auto-enrolled after 30 days if they do not opt out and will begin saving through payroll contributions facilitated by their employer.
Employees can opt out and back in at any time.
The employee’s account is a Roth IRA (after tax) that is set up in their name through Cal Savers (can be recharacterize to a Traditional IRA.)
The default savings rate is 5% of gross pay. Employees can change their rate at any time.
The employee’s account is portable. It stays with them even if they leave your workplace.
Employees can manage their account online, by phone, or using the CalSavers mobile app.
How Does This Get SetUp with Pink Payroll?
Upon request, Pink Payroll create the codes in your software account to use for the employee deductions.
We will need a signed authorization form, that lists responsibilities of the employer and Pink Payroll. When that document is ready, it will be linked here for quick use.
We will have added the deduction to your company payroll software by 3/27/22 so that you can add each employee's deduction, as needed.
For more questions, we will have additional articles and videos, shortly.
We have scheduled Webinars as of 4/20/22. Click here to register.