In 2016, California showed its dedication to ensuring its citizens properly plan for their retirement by enacting the CalSavers Retirement Savings Trust Act, which seeks to ensure that more Californians have proper retirement savings accounts. The act came in response to a significant problem within California’s workforce, which is that almost half (48% as of 2019) of Californian employees aged 25-64 have no dedicated retirement assets at all. With the CalSavers program entering its third and final stage of deployment, we want to ensure that your business is compliant so you don’t have to worry about the penalties for missing the final deadline.
What Does My Business Need to do?
The deadline for businesses in California is through three stages, spanning the past two years. For businesses with over 100 employees, the deadline was September 30th, 2020, and for businesses with over 50 employees, the deadline was June 30, 2021. Hopefully, your business is already exempted or enrolled if it falls into these categories, but if not be sure to contact CalSavers as soon as possible to rectify the issue. The final deadline is June 30, 2022, and applies to businesses with 5 or more employees.
If your business already offers a retirement plan for your employees (401k and IRA plans both satisfy this requirement), you likely do not have to do anything. Most businesses were automatically exempted if they offer a plan, but if your business already offers retirement plans and still received a notice from CalSavers, be sure to contact them to sort out the problem. Otherwise, your business will need to enroll with CalSavers, which can be done through their website. You’ll just need your EIN or TIN, and your CalSavers access code, which was likely sent to you via email or letter. If you’ve not received an access code, you can also request another one through their website.
Your business must also help facilitate employee enrollment, which is simple, as employees are automatically enrolled after 30 days. They also have the option to choose a different contribution rate from the standard rate of 5%, and opt-out of auto-escalation, which increases by 1% annually to a maximum of 8%. If an employee chooses they may also opt-out of the program entirely, but as long as your business has enrolled with the program and facilitated signup for your employees, this won’t incur any penalties.
(Hopefully) Not a Large Impact on Your Business
Because there are no fees to the employer, and management of the retirement account is done entirely through the CalSavers program, an employer’s business shouldn’t be affected in any significant way. There are no fees or matching contributions for employers with this program, so it’s a simple option for small businesses that haven’t yet established a retirement plan.
Ensure your business is compliant and sign up today, or make certain that your business is already offering retirement options to its employees to avoid the exorbitant fees from missing the deadline. If your business is not in compliance 90 days after the deadline, it will receive a penalty of $250 per employee, and if still not in compliance 180 days later, another penalty of $500 per employee. However, if your business was not in compliance by deadline (Sept. 30, 2020 for businesses with over 100 employees; June 30, 2021 for businesses with over 50 employees; or June 30, 2022 for businesses with 5 or more employees) and does not correct the error, you will receive a penalty of $250 per employee. If you are still not in compliance 90 days later, another penalty of $500 per employee will be issued.
We don’t want your business to face these penalties or any others as a result of mistakes in compliance, tax filings, or poor asset protection – and that’s why we’re dedicated to ensuring your business is protected. Contact the Law Offices of Tyler Q. Dahl today to get started, and save your business money.
Dahl Law Group
