Does your company have 5 or more employees and reside in California? If so, then you need to know about the California retirement plan requirement taking effect on June 30, 2022. The State of California will require any business with 5 or more employees to offer retirement plans. Here are some of your options for meeting this requirement.
Learn How to Supercharge Your 401(k): Check out our Infographic
CalSavers
CalSavers is a state-run retirement savings program for employees whose jobs do not offer employer-sponsored plans. This program lets employees save for retirement in an IRA-style account. CalSavers does have the disadvantage of having a lower contribution limit than most other retirement plans. Investment opportunities are limited, but the employer bears no responsibility for picking the options.
Traditional 401(k) Plans
401(k) plans, like those we administer at California Pensions, are another option for employers looking to comply with the California retirement plan requirements. These plans require more work and fees for the employer, but they give the employees more opportunities to save for retirement. The plan sponsor also has significant opportunities for design flexibility and tax-advantaged company contributions. Remember–owners can receive significant sums for their own retirement far and above the 401(k) deferral limits. Investment opportunities are much broader as an employer-sponsored plan can pick from a much wider array of assets, including mutual funds, ETFs, individual stocks and bonds, and even many “non-standard assets” such as partnerships and real estate.
Penalties
If a company with 5 or more employees does not enroll in CalSavers or offer another qualifying retirement vehicle to their employees, they may be fined between $250 and $500 per eligible employee. These fines can vary based on the number of days the company is non-compliant with the regulations after receiving notice.
The June 30, 2022, deadline is quickly approaching. Make sure your company is compliant with these new retirement plan regulations. Contact California Pensions today to learn how we can help you meet the CalSavers requirement.
