If you’re running a business or managing employees in California, staying ahead of CalSavers is crucial. Unsure what CalSavers entails? Let’s dive into the essentials to keep you informed and compliant.

Understanding CalSavers Basics

CalSavers, initiated in 2016 and piloted in 2018, is California’s mandatory retirement program. Its mission is to combat the retirement crisis by expanding access to retirement savings tools. Compliance deadlines vary based on company size, with the final deadline for companies with five or more employees set for June 30th. Your company must register with CalSavers unless it already offers a qualifying retirement program.

eBacon Software Payroll Manager planning Calsavers Basics

Qualified Retirement Plans

Several retirement plans exempt your company from CalSavers, including:

  • 401(a) pension or profit-sharing plans
  • 401(k) plans
  • 403(a) and 403(b) plans
  • Simplified Employee Pension (SEP) plans
  • Savings Incentive Match Plan for Employees (SIMPLE) plans
  • Payroll deduction IRAs with automatic enrollment

Key Details of CalSavers

Registering with CalSavers is mandatory for companies without existing retirement programs. However, employees have the option to opt-out. Noteworthy CalSavers facts include:

  • CalSavers operates as a Roth IRA, portable across jobs.
  • Automatic enrollment occurs after 30 days unless employees opt out.
  • Contributions start at 5% of gross pay, increasing annually by 1% up to 8%.
  • Employees can adjust contribution rates or opt out of the program at any time.

Compliance Essentials

For Compliance, Essential Details Include:

  1. Deadline Awareness: Ensure that your company registers with CalSavers and uploads employee lists promptly, with the deadline set for June 30th. Meeting this crucial timeline is vital to avoid potential penalties and maintain compliance with the program’s regulations.
  2. Exemption Clarification: Even if your company already offers a 401(K) or other qualified retirement program, it’s essential to understand that exemption from CalSavers isn’t automatic. To qualify for exemption, you must formally apply via the official CalSavers website. Failure to do so could result in inadvertent non-compliance and subsequent penalties.
  3. Penalty Ramifications: Familiarize yourself with the potential penalties associated with non-compliance. These penalties can range from $250 to $500 per employee, depending on various factors such as the duration of non-compliance and the size of your company. Understanding these consequences underscores the importance of timely registration and adherence to CalSavers requirements.
Payroll Savings Calsavers Piggy Bank

Special Considerations for Construction Companies

Construction companies operating within the stringent framework of prevailing wage requirements encounter distinct hurdles when navigating CalSavers. The program’s prohibition of employer contributions presents a significant obstacle for an industry reliant on fringe benefits as a means of compensation.

The Sizzle Newsletter Construction Payroll

401(k) Bona Fide Trust

Given the inability to leverage employer contributions, construction firms risk losing out on tax advantages inherent in traditional retirement plans. However, a strategic recourse exists in the form of a 401(k) bona fide trust. By channeling fringe benefits through this trust, construction companies can preserve their ability to provide essential benefits while simultaneously mitigating tax liabilities. This innovative approach not only ensures compliance with CalSavers but also safeguards the financial well-being of employees within the construction sector.

Get Help with CalSavers

Staying compliant with CalSavers is paramount for California-based businesses. Explore your options, including our 401(K) program, to ensure compliance while maximizing benefits for your employees. For inquiries or assistance, contact us at (623) 580-4900 or infobits@eBacon.com. Stay ahead with CalSavers and other retirement issues like SECURE Act 2.0 with eBacon -– your employees’ financial future depends on it.

Get Started with eBacon Today


FAQs About CalSavers Compliance

Can construction companies participate in CalSavers despite the prohibition on employer contributions?

Absolutely. While CalSavers doesn’t allow employer contributions, construction companies can still enroll their employees in the program. However, to maximize benefits and remain compliant, consider alternative retirement solutions like a 401(k) bona fide trust. This allows for the continuation of fringe benefits contributions while navigating the complexities of prevailing wage requirements.

Are there penalties for failing to comply with CalSavers deadlines?

Yes, non-compliance with CalSavers deadlines can result in penalties ranging from $250 to $500 per employee. These penalties are influenced by various factors, including the duration of non-compliance. It’s imperative for businesses to adhere to registration and reporting deadlines to avoid these potential financial repercussions.

What steps should a company take if it already has an existing retirement program in place?

If your company already offers a qualified retirement program, you may be exempt from participating in CalSavers. However, it’s essential to ensure that your existing program meets the criteria outlined by CalSavers. Consult with a financial advisor or legal expert to verify compliance and explore options for exemption through official channels.

The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.