Understanding CalSavers: California's Retirement Savings Program for Your Clients

As a financial advisor, it's crucial to be aware of the retirement savings options available to your clients, especially those in California. CalSavers is a state-run retirement program designed to bridge the gap in retirement coverage, particularly for small business employees. This initiative aims to ensure that millions of California workers have access to a retirement savings plan, helping them secure their financial future.

Why CalSavers is necessary

CalSavers, formerly known as California’s Secure Choice savings program, addresses a significant issue: only one-third of small businesses offer retirement benefits¹, leaving many employees unprepared for retirement. This program mandates that small business owners provide a retirement plan, thereby promoting financial security among workers. With approximately seven million California workers benefiting from this program, it plays a crucial role in ensuring that half of U.S. households, which are not on track to maintain their current standard of living in retirement, have a better chance at financial stability.

You might also be interested in: Why State Governments Are Requiring Small Businesses to Offer Retirement Plans

Key features of CalSavers

CalSavers is mandatory for businesses in California that do not offer a qualified retirement plan, and is designed to be simple and cost-effective for employers. It automatically enrolls eligible employees at a 5 percent contribution rate, with an annual auto escalation of 1 percent up to 8 percent. Employees can opt in or out at any time, and their accounts remain with them even if they change jobs. Contributions are fully vested from the start, providing immediate benefits to savers.

CalSavers impact on small business owners

For small business clients, CalSavers offers a straightforward, cost-effective solution with minimal administrative burden. Employers are required to register, set up accounts, and facilitate payroll deductions for participating employees. There are no fiduciary responsibilities, plan fees, or annual reporting tasks for employers. The only real responsibilities clients have include registering for the plan, setting up the account, and submitting participating employees’ contributions via payroll deduction.

CalSavers registration requirements   

Businesses with at least one eligible employee must register for CalSavers unless they offer another qualified retirement plan. This includes options like 401(k), SEP, SIMPLE IRA, or payroll-deducted IRA with auto-enrollment. Religious, tribal, and governmental organizations are exempt from this mandate. 

CalSavers rules, regulations, deadlines, and penalties 

CalSavers features a three-year phased rollout with deadlines based on employer size. Registration opened on July 1, 2019, and businesses must adhere to specific deadlines to avoid penalties. Clients in California will need to adhere to the following CalSavers registration deadlines: 

• 5+ Employees
  • Deadline passed 
  • Take action now to avoid any financial penalties 
• 1-4 Employees 
  • December 31, 2025 

Clients that fail to adhere to the above registration deadlines for your business, you'll be subject to some pretty hefty penalties. Employers that don't register in a timely manner, without good reason, will receive a failure of notice to comply; if 90 days pass after receiving this notice and the employer still hasn’t taken action to register for the program, they'll be required to pay a penalty fee of $250 per eligible employee. Employers that wait another 90 days before acting, totaling 180 days after receiving the notice, will be subject to an additional $500 penalty per eligible employee for failing to comply with the mandate.

Current status of CalSavers retirement program 

The phased rollout for employees to enroll in CalSavers is currently underway, and a few years in, the program is clearly already working. As the program administrator for CalSavers, Ascensus works closely with the state to: 

• Simplify the plan and account management process with custom-built, user-friendly administration websites 
• Provide consistent and clear education about the program through all channels 
• Offer a dedicated service team to answer employer and employee questions on the program and general retirement savings 

For more information about CalSavers: 

If you have additional questions about the CalSavers program, there are a variety of helpful resources available to you on the CalSavers website. If you’d rather speak with a representative from CalSavers for more information, call 855-650-6916 or email clientservices@calsavers.com.

¹"Only One-Third of Small Businesses Offer Employees Retirement Plans." Accessed August 31, 2023. https://www.investopedia.com/only-a-third-of-small-businesses-offer-retirement-plans-7497113.