California’s New Retirement Program: CalSavers

California’s New Retirement Program: CalSavers

Source: California Employers Association


Restaurants take note, California’s recently piloted retirement savings program, CalSavers, is about to become mandatory. The state-run program was set up to make it easier for employees working for hospitality companies without a retirement savings program to save for later life by paying into an individual retirement account (IRA). Until now, adoption of the program has been optional, but employers will soon be required by law to enroll workers or provide a retirement plan through the private market.

CalSavers Details 

Currently, the CalSavers program offers employees Roth IRAs, which enables them to save after-tax earnings now and withdraw funds tax-free during retirement. By default, five percent is deducted from your participating employees’ paychecks (although they can choose a different contribution rate). That contribution rate will automatically increase by one percent each year until it reaches eight percent, unless that person has opted for a different amount. Importantly, CalSavers retirement plans are portable, so will move with workers if they change jobs.  The fact that average wage-earning employees can take advantage of years of tax-free investment earnings is the reason that Roth IRAs are so frequently recommended by financial experts.

What This Means for Employers

From July 2019, all eligible California employers have been able to enroll their workers. If those employees chose to participate, funds will be automatically deducted from their paychecks and be channeled into their CalSavers IRA account. However, you, the employer, can choose to adopt a policy stating that you have no control over individual investments in the CalSavers program and should make it clear that investment discretion is in your employees’ hands.

Important Deadlines

The program is being rolled out over the next three years. The different deadlines will depend on the size of your company. 

Roll out dates for CalSavers are as follows:

  • June, 2020: Companies with more than 100 employees. 
  • June, 2021: Companies with 50-99 employees.
  • June, 2022: Companies with 5-49 employees. 

For more information, visit CalSavers  on the California State Treasurer’s website. If you have any questions or need help with planning your company’s CalSavers policy, get in touch with our HR experts today.