As of June 30th, 2022, if you have 5 or more California Based employees your business will be required to register for CalSavers if you do not sponsor a qualified retirement plan such as a 401(k).
If you already sponsor a qualified retirement plan, be sure to report an exemption to inform CalSavers so that you are not penalized after June 30th, 2022.
Wait, there are penalties? Yep. Penalties will be issued at $250 per eligible employee after 90 days of non-compliance, with an additional penalty of $500 per eligible employee after 180 of non-compliance. While employees can opt-out of the program, employers can only avoid the penalties by sponsoring a qualified retirement plan. This means an employer with 10 eligible employees will owe $7,500 at the end of 2022 for non-compliance.
So what are your options?
Option 1: Register for CalSavers
You will need to communicate with your employees that you have registered and that they are auto-enrolled at a 5% contribution, or will need to opt out. If any of your employees remain enrolled, contributions will need to be updated at their desired percentage in your payroll system and be submitted to CalSavers within 7 days of taking the deduction from an employee’s paycheck. Check with your payroll provider whether or not they will be able to facilitate these payments.
Option 2: Enroll in a 401(k) Program
CalSavers is already offering a retirement option for employees, so why would you enroll in a 401(k)? 401(k) programs offer tax savings that could benefit both you and your employees at year’s end and also allow you to make contributions to your employees’ plans. Not ready to contribute to a 401(k) program yet as part of your benefits package? No problem, this option can be added at any time.
There are 401(k) programs such as Guideline that integrate seamlessly with Gusto and other payroll software so that plan contributions are sent on your behalf when payroll is completed – this saves you time and ensures you are compliant!
Interested in learning more about the benefits of implementing a 401(k) through Guideline? Reach out by April 30th to ensure adequate time to implement the plan before the June 30th deadline.
Have any other questions about CalSavers or other qualified retirement plans? Reach out to your advisor at Accountix to help! You can also connect with Ashley here if you’d like to know more.