Did you know you may be required to offer a retirement savings plan to your employees?
The state of California passed legislation requiring private-sector employers to provide a qualified retirement savings vehicle. California launched a state-run Roth IRA program as an option for California-based, private-sector workers whose employers do not provide a retirement savings plan. CalSavers is a basic plan, and while it may be easy for small businesses to administer, it does have employer requirements. Learn about what applies to you and what deadlines you need to be aware of.
WHO?
CalSavers was designed for small business who cannot afford the costs of offering retirement programs to their employees. It is meant to give employers an option to help their employees save for retirement without any employer fees or fiduciary responsibility.
Here is who is required to participate:
- Employers with 5 or more employees will be required to provide a retirement option
- Employers with 5 or more employees who do not provide retirement options will be required to participate in the CalSavers program
- Employers with 5 or more employees that already offer retirement savings program options will not be required to participate
- Small businesses with fewer than 5 employees will not be required to participate
WHEN?
Small businesses will be phased into the CalSavers program over the next 2 years based on the number of employees. You will need to register with CalSavers to verify your exemption on the state-run site on or before the registration deadlines.
- Employers with over 100 employees are required to participate by September 30, 2020 (extended from June 30 due to the COVID-19 pandemic)
- Employers with over 50 employees are required to participate by June 30, 2021
- Employers with 5 or more employees are required to participate by June 30, 2022
If an eligible employer fails to participate in the CalSavers program within 90 days of the applicable deadline, they will receive a penalty of $250 per employee. If the employer fails to comply 180 days or more after the deadline, they will be penalized an additional $500 per employee.
WHAT?
Unfortunately, the CalSavers program offers you limited options, no customization, and no advisor to service your plan and provide support. Additionally, if you have some employees that don't qualify for the Calsavers plan you can’t use it for any of your employees, and you will have to select a different type of retirement plan for your company. Because employers are now required to offer retirement plans, Calsavers being the most basic, it likely won’t be long before other companies start providing retirement plans with more options looking to gain a competitive advantage.
Now is the time to explore retirement plan options with K2 Financial Partners to find a plan that fits your needs. We know that your employees are your most important assets, and our firm has decades of experience in crafting and maintaining employee retirement plans. There may also be alternative plans such as a SIMPLE IRA, SEP-IRA, and 401k plans that provide a better variety of benefits to suit your company’s particular needs. We can help you explore all your options.
SCHEDULE A REVIEW with our SmartVestor Pro, Nick Covyeau, to discuss a retirement savings program that works for you, your business, and your employees.
Source: CalSavers.com