• Mark Dierolf

CalSavers notice: what's going on?

Updated: May 2

California businesses and their workers are receiving notices from the CalSavers program. CalSavers is a state-run retirement savings program funded by non-government workers.


Businesses with 5 or more workers need to register with CalSavers by a deadline or report an exemption. Businesses with over 50 workers should have already done this, but all others have until June 30, 2022.


Exempt from the CalSavers mandate are certain employers and their workers with a qualified retirement plan.


Affected businesses must report eligible workers to the state program, collect payroll deductions and send in the money. Businesses have no other involvement.


All employers should inform workers of CalSavers and the option to opt out, even when workers are exempt because they could be affected elsewhere and many small employers are unaware of the mandate.


Paycheck deductions start at 5% of a worker's gross pay and are expected to rise each year until 8%. There's no tax deduction because the money funds a Roth IRA managed by the CalSavers program.


Workers can opt out or reduce their withholding after their employer has registered, but workers must tell CalSavers what to do for each employer.


Reasons why a worker may opt out include:

  • Prefers to fund a Traditional IRA which may be tax-deductible;

  • Already contributing to a retirement plan;

  • Doesn't qualify for a Roth IRA; or

  • Can't afford it.

Which way is better?

CalSavers charges participating workers for its cost, not their employer.


Workers may be better off opting out of CalSavers and setting up an IRA elsewhere.


An incentive for a business to set up and fund its own retirement plan for workers is the IRS startup tax credit. But this should only be done when the employer plans on paying for the plan's administration and there is a long-term commitment.


Reach out to CalSavers for questions about the program by calling (855) 650-6918 or visiting the CalSavers Q&A page. Employers with union workers should call CalSavers to discuss their situation.


But if you need help with insurance or retirement benefit plans, call Mark Dierolf @ (831) 753-0507.

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