The CalSavers Retirement Savings Program is a by-product of state-mandated retirement legislation that was launched in July 2019 as part of a phased rollout over three years with the goal of improving the financial security of Californians working in the private sector. It is sponsored by the State of California, facilitated by businesses, and funded by employee savings.
This rollout phase applies to employers with 5 or more employees who do not offer a retirement savings plan, self-employed individuals, and others who want to save extra. Savers participate by contributing to a Roth Individual Retirement Account (IRA) that belongs to them via payroll deductions on a post-tax basis. An option is also available for CalSavers participants who want to recharacterize their account to a traditional IRA where contributions are made on a pretax basis.
Employers with more than 50 employees were required to register by June 30, 2021, but are still able to register. Employers with 5 or more employees have until June 30, 2022, to register. There are no employer fees nor fiduciary responsibility and minimal administrative upkeep makes it relatively simple for businesses to participate.
Participation in CalSavers is voluntary for employers. However, those who qualify but decline to join the program must sponsor a retirement plan through the private market or risk penalization. It’s optional for employees who may opt-out at any time after enrollment by the employer.
To participate, employers will be required to upload employee information to CalSavers and submit participating employee contributions through payroll deduction.
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