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California has recently established its own state-run retirement plan. The plan has been mandated for use by business owners with 5 or more employees who otherwise do not offer a retirement plan benefit program for their employees, such as a 401(k), SIMPLE IRA or SIMPLE 401(k).

Now is the time to discuss this program and what it means for your business. We can help guide you through your options and help you decide what's best for you and your employees. Here are some frequently asked questions being asked by employers like you:

1. What is CalSavers?

In 2016, Senate Bill 1234 was passed, requiring the state to develop a workplace retirement savings program, known as CalSavers, for private sector workers whose employers do not offer a retirement plan. State law protects employers from any liability or fiduciary responsibilities to the plan.

2. Who is required to implement the CalSavers program?

Employers with one or more employees who do not provide a retirement plan for their workers must register for CalSavers and facilitate employee contributions to Individual Retirement Accounts by December 31, 2025.

3. Do I have to use the CalSavers program?

No. We can assist you in establishing your own employee retirement plan, such as a 401(k) or SIMPLE IRA, or SIMPLE 401(k) to satisfy this requirement.

4. Reasons to establish your own Employee Retirement Plan:

• The CalSavers program does not allow for employers to make contributions on behalf of their employees. In a competitive labor market, this limits your flexibility and takes away your ability to offer an attractive retirement plan benefit to employees you are trying to recruit.
  
• The CalSavers managers will pick the investment options, which may be different from what you and a financial professional might choose.
  
• Employee contributions are limited with the CalSavers program. It only allows a maximum contribution of $7,000 in 2024, compared to $23,000 for a 401(k) or $16,000 for a SIMPLE IRA or SIMPLE 401(k). (Not including catch-up contributions).
  
• While there is no cost to employers for participating in the CalSavers program, it does not offer the employer any tax credits, which you can get by offering a 401(k) plan. For example, starting a 401(k) plan currently allows employers up to a $500 tax credit in each of the first three years.
  

Are you worried about the extra work and time commitment necessary to sponsor a workplace retirement plan such as a 401(k)? We can help you you review your options -- focusing on very cost effective solutions that can help minimize your administrative burdens and fiduciary risk. Schedule a meeting with us today.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.