The SECURE Act/SECURE Act 2.0
In 2019, the federal Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed with the purpose of helping employees save for retirement. In 2022, Congress amended the law to increase eligibility and require automatic enrollment for certain 401(k) and 403(b) plans beginning in 2025. Employees may be able to opt out of these plans. There also are exceptions for small businesses who regularly employ ten or fewer employees, new businesses less than three-years old, and church, tribal, and governmental plans.
The CalSavers Program
California is one of many states that require employers to offer a qualified retirement plan or participate in a state-facilitated program. Under the law that created CalSavers, private employers who do not sponsor a retirement plan must participate in CalSavers. The mandate applies to employers with one or more California employees.
CalSavers was rolled out over a three-year period, which has now ended. If an employer did not register by the mandated deadline of September 30, 2020, June 30, 2021, or June 30, 2022, the employer is out of compliance and must register immediately or face enforcement action, which includes financial penalties. Specifically, each eligible employer that, without good cause, fails to allow its eligible employees to participate in CalSavers, on or before 90 days after service of notice of its failure to comply, shall pay a penalty of $250 per eligible employee if noncompliance extends 90 days or more after the notice. If an employer is found to be in noncompliance 180 days or more after the notice, an additional penalty of $500 per eligible employee will be imposed. Employers may also be subject to penalties for failure to register before their deadline or failure to complete other actions necessary to allow eligible employees to participate, including failure to upload employee information and failure to submit employee contributions under timeframes established in state regulations.
Employers who do not sponsor a retirement plan with an average of five or more employees during the preceding calendar year must join CalSavers by December 31 (of the year after reporting an average of five or more employees). Employers who do not sponsor a retirement plan with one to four employees must register by December 31, 2025. CalSavers determines the mandate status for employers based on employee data that employers submitted to the Employment Development Department in the preceding year, and employers will receive their notice to register in the spring before the December deadline.
CalSavers is designed to easily facilitate employer participation by having employers add and maintain their employee roster and submit contributions via a payroll deduction. Once an employer registers, which takes a few minutes, the automatic enrollment process begins, and employees will have 30 days to decide whether they want to opt out of the Roth IRA account. There are no employer fees or employer fiduciary responsibility, and employees maintain their account directly through the program.
If an employer offers a qualified retirement plan and receives a notice to register, they can request exemption on the employer portal.
If you are unsure of your deadline to register, you can contact CalSavers at (855) 650-6916 or clientservces@calsavers.com.
