Did you know that California has adopted a state mandate that requires all businesses with over 5 employees to comply by opting into the CalSavers Retirement Savings program if an Employer-Sponsored retirement plan (401k, 403(b) or SIMPLE) is not offered to its employees?
We have all read the headlines and heard the news (as in this labor center study), that individual retirement savings are falling woefully short of retirement needs. Further, the current Covid-19 health crisis and the accompanying financial crisis is likely to extend this current lack of savings for many would-be retirees.
In an effort to help close the gap between retirement savings and retirement needs, California has sought to provide a vehicle for employees to save for retirement.
Unlike other mandates in the past, this state mandate comes with teeth to enforce it in the form of fines and penalties for businesses that do not opt-in or offer their own retirement plan following the phased-in approach the state is outlining. The costs can quickly add up at $250 per employee for 90 days, and up to an additional $500 per employee if the company has still not resolved the issue after 180 days. Employers with 100 or more employees must choose by September 30, 2020, while employers with over 50 have until June of 2021, and employers with over 5 employees must decide by June of 2022.
So the urgent question for business owners quickly becomes, which option should I choose? Is using the State-run option, CalSavers, best for my business and employees, or should I offer my employees a retirement plan of my own?
The answer is that it often depends on your company. We encourage you to come to our webinar on July 14th at 10 am to hear from local retirement experts about the suitability of CalSavers, when it is right for a business, and when there could be better options in the form of a personalized 401k plan.