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California Savings Plan: A Comprehensive Guide for Organizations

March 21, 2025

Introduction: Empowering Employee Retirement Security

The California Savings Program, officially known as CalSavers, represents a landmark initiative designed to address the retirement savings crisis facing millions of Californians. For organizations operating within the state, understanding this mandatory program is not just a compliance requirement—it's an opportunity to support employee financial wellness while meeting state regulations with minimal administrative burden.

This comprehensive guide will walk you through everything your organization needs to know about CalSavers, from compliance deadlines to implementation strategies and the advantages this program offers to both employers and employees.

What Is CalSavers?

CalSavers is California's state-sponsored retirement savings program that provides employees with a simple, portable way to save for retirement when their employer doesn't offer a qualified retirement plan. Established by Senate Bill 1234 in 2016, the program addresses a critical gap in retirement readiness across the state.

Key Program Features:

  • Automatic enrollment with opt-out option

  • Roth IRA as the default account type

  • Portable accounts that follow employees throughout their careers

  • No employer fees or fiduciary responsibility

  • Flexible contribution options for employees

  • Professional investment management

Who Must Comply with CalSavers?

California law mandates that employers with five or more employees must either offer a qualified retirement plan or register for CalSavers. The program has been implemented in phases based on employer size:

  • Employers with 100+ employees: Deadline was September 30, 2020

  • Employers with 50+ employees: Deadline was June 30, 2021

  • Employers with 5+ employees: Deadline was June 30, 2022

Organizations that already offer qualified retirement plans such as 401(k)s, 403(b)s, simplified employee pensions (SEP), or SIMPLE IRAs are exempt from CalSavers requirements but must certify their exemption status.

Benefits for Employers

Implementing CalSavers offers several advantages for California organizations:

  1. Compliance with state law: Avoid potential penalties of $250 per eligible employee for non-compliance, which increases to $500 per employee after 90 days.

  2. Minimal administrative responsibilities: The program is designed to minimize employer burden with:

    • No employer fees

    • No employer contributions

    • No fiduciary liability

    • Simple payroll deduction process

  3. Competitive advantage: Offering retirement benefits, even state-mandated ones, can improve employee recruitment and retention.

  4. Employee financial wellness: Supporting long-term financial security for your workforce can lead to higher productivity and job satisfaction.

Benefits for Employees

For your workforce, CalSavers provides:

  • Automatic enrollment: Making saving the default option increases participation rates

  • Portability: Accounts belong to employees and follow them throughout their careers

  • Flexible contributions: Starting at 5% with auto-escalation options

  • Professionally managed investments: Institutional-quality investment options with low fees

  • Tax advantages: Roth IRA benefits for eligible employees

Step-by-Step Implementation Guide for Organizations

Step 1: Determine Your Organization's Status

Action Items:

  • Count the number of employees (including full-time, part-time, and seasonal workers) over the past 12 months

  • Verify if you already offer a qualified retirement plan

  • If exempt, prepare to certify your exemption status

Step 2: Register Your Business

Action Items:

  • Visit CalSavers.com to begin registration

  • Have your federal Employer Identification Number (EIN), California Employer Payroll Tax Account Number, and organization details ready

  • Designate a primary administrative contact and a payroll representative

  • Complete the registration process online (typically takes 15-20 minutes)

Step 3: Prepare Employee Information

Action Items:

  • Compile a roster of all eligible employees (anyone age 18+ receiving a W-2)

  • Gather required information for each employee:

    • Name

    • Social Security Number or Individual Taxpayer Identification Number

    • Date of birth

    • Contact information (address, phone, email)

Step 4: Upload Employee Information

Action Items:

  • Format employee information according to CalSavers specifications

  • Upload the employee roster through the secure employer portal

  • Review for accuracy and completeness

Step 5: Inform Employees

Action Items:

  • Distribute informational materials provided by CalSavers

  • Ensure employees understand they have 30 days to opt out before automatic enrollment

  • Make neutral presentations about the program (employers cannot encourage or discourage participation)

  • Direct employees to CalSavers resources for investment questions

Step 6: Set Up Payroll Deductions

Action Items:

  • Configure your payroll system to accommodate CalSavers deductions

  • Default contribution rate is 5% of gross pay

  • Ensure your payroll provider or software can implement the deductions

  • Establish a process for ongoing management of contributions

Step 7: Submit First Contributions

Action Items:

  • Begin payroll deductions 30 days after employee notification

  • Submit contributions through the CalSavers employer portal

  • Maintain accurate records of all transactions

Step 8: Ongoing Maintenance

Action Items:

  • Add new eligible employees within 30 days of hire

  • Process opt-out requests promptly

  • Update employee information as needed

  • Submit contributions with each payroll cycle

  • Maintain compliance documentation

Common Challenges and Solutions

Challenge: Employee Resistance

Solution: Provide clear, factual information about the program while remaining neutral. Emphasize the ease of opting out for those who choose not to participate.

Challenge: Payroll Integration Issues

Solution: Work closely with your payroll provider to ensure smooth implementation. CalSavers offers technical support and resources specifically designed for various payroll systems.

Challenge: Tracking Seasonal or Variable-Hour Employees

Solution: Develop a system to monitor employee counts throughout the year, including seasonal fluctuations. When in doubt, include employees who work regularly.

Challenge: Maintaining Accurate Records

Solution: Implement a quarterly review process to ensure all eligible employees have been offered the program and all contribution records are accurate.

Alternative Options for Employers

Organizations preferring to offer their own retirement plans instead of CalSavers have several options:

  1. 401(k) Plans: Traditional employer-sponsored retirement plans with higher contribution limits than IRAs.

  2. SIMPLE IRAs: Designed specifically for small businesses with 100 or fewer employees.

  3. SEP IRAs: Simplified Employee Pension plans that allow employers to contribute to employee retirement accounts.

  4. Multiple Employer Plans (MEPs): Allow small businesses to join together to offer retirement benefits with reduced administrative burden and costs.

Conclusion: Embracing CalSavers as an Opportunity

While CalSavers represents a mandated program for California employers, forward-thinking organizations recognize it as an opportunity rather than a burden. By facilitating employee access to retirement savings vehicles, businesses can contribute to workforce financial wellness while meeting their legal obligations with minimal administrative overhead.

The program's design explicitly minimizes employer responsibilities while maximizing potential benefits for employees. For organizations seeking to remain competitive in California's labor market while avoiding compliance penalties, embracing CalSavers represents a strategic approach to both regulatory compliance and employee satisfaction.

Resources for Additional Support

By following this comprehensive implementation guide, California organizations can successfully navigate the CalSavers requirements while supporting their employees' long-term financial security.

Disclaimer: This article is intended for informational purposes only and does not constitute legal, tax, or financial advice. Organizations should consult with appropriate professionals regarding their specific circumstances and compliance requirements.