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CalSavers is a retirement savings program sponsored by the state of California, facilitated by employers and funded by employee investments via payroll deductions. CalSavers is a Roth IRA with automated enrollment; however, employee participation is completely voluntary. Any employer with five or more employees that does not already sponsor a retirement plan will be required to participate.

Program highlights:

  • 5% of employees’ gross pay is withheld and contributed to a Roth IRA
  • Roth IRA contributions are made with after-tax dollars (pre-tax contributions are not available)
  • Employees’ first $1,000 will be invested in the CalSavers Money Market Fund
  • Savings over $1,000 will be invested in a target retirement date fund based on the employee’s age

Employees may opt out of these investment options and choose from a simple menu of other investment options that can be found on the CalSavers website. In addition, employees may change their automatic contribution rate or opt out of the program at any time. IRA contributions limits will apply.

How do businesses register for CalSavers?

The employer is responsible for registering the business, as well as submitting employee contributions. Employees can create an account linked to their employer to manage their investments. Employers and employees can register at The program is rolling out in phases, starting with larger employers. See below chart for deadlines:

Employers with 100 or more employees  September 30, 2020
Employers with 50-99 employees June 30, 2021
Employers with 5-49 employees June 30, 2022

For new businesses

Businesses are required to automatically enroll their employees in the savings program if they have at least five employees. Employers will receive a notice from the state and must register within 30 days.

Is there a penalty for businesses that fail to comply with the mandate?

Employers who do not comply with CalSavers may be subject to fines and penalties as described in California Unemployment Code Section 1088.9(b).

Do businesses have to use the state-sponsored program?

No. Registering for the CalSavers program is just one way to fulfill the requirement. Businesses can also establish their own employee retirement plan, such as a 401(k), SEP IRA, or SIMPLE IRA, to satisfy this requirement. You should consider all available options before making a decision.

Benefits of starting your own retirement plan (outside of CalSavers):

  • Larger variety of investment options
  • Higher contribution limits with a potential tax deduction for company contributions
  • A way to attract and retain quality employees

Considerations for starting your own retirement plan (outside of CalSavers):

  • Potentially higher fees and expenses
  • May be required to make a company contribution each year

Contact a Stifel Financial Advisor to discuss the CalSavers requirements or to establish a retirement plan for your company.

Stifel does not provide legal or tax advice. You should consult with your legal and tax advisors regarding your particular situation.