CalSavers notice: what's going on?

California businesses and their workers are receiving notices from the CalSavers program. CalSavers is a California 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. Many businesses have already done this.

Businesses that are not exempt must:

• Report eligible workers to the CalSavers program;

• Collect payroll deductions; and

• Send CalSavers the money taken from workers.

The businesses have no other involvement. CalSavers charges participating workers for its cost, not the employer.

CalSavers paycheck deductions start at 5% of a worker's gross pay and are expected to rise each year to fund an individual Roth IRA for the worker. The paycheck deductions are not tax deductible.

Workers must opt out for each employer which is why all employers, even those that are exempt, should inform workers of CalSavers and their option to opt out or reduce paycheck debits.

Here are reasons why a worker may want to opt out or reduce the debits:

• Already contributing to a retirement plan;

• A Traditional IRA may be tax-deductible;

• Doesn't qualify for a Roth IRA; or

• Can't afford the paycheck debit.

Which way is better: starting a retirement plan, or CalSavers?

• Workers may be better off opting out of CalSavers and funding a Traditional IRA when it is tax deductible; and

• Workers are better off with a retirement plan at work when the employer pays the costs. The employer may qualify for a retirement plan startup tax credit.

Didn't receive a notice, missed the deadline or have a question? No worries, call CalSavers today:

• Workers: (855) 650-6918

• Employers: (855) 650-6916

• Or visit the CalSavers Q&A page.

But for help with an insurance or retirement benefit plan, call Mark Dierolf @ (831) 753-0507. Services include plan options, setup, and rollovers.