Things to Know

  • California law currently requires all employers with 5 or more employees to offer a retirement plan.
  • The deadline to comply was June 2022.
  • Starting in 2025, employers with 1 or more employees will have to offer a retirement plan.
  • The state can impose fines of up to $750 per employee for failure to comply.
  • To comply, employers can offer a retirement plan through a provider of their choice, or use the state-run plan.

This guide will help you understand what CalSavers is and who it applies to, along with what you need to do to comply.

What is a The Retirement Mandate law in California?

California law makes it mandatory for employers with 5 or more employees to provide a retirement savings plan to their employees. The deadline was June 2022, and employers not complying are subject to fines. Starting in 2025, this law will apply to any employer with at least one employee in California. The law is meant to help combat the retirement savings crisis prevalent in the state, where nearly half of private sector employees lack access to retirement plans at their workplace.

What is CalSavers?

CalSavers is the name of the state-run retirement plan. It was designed to provide a retirement savings option for employers that don’t offer a retirement plan and don’t want to offer a plan through a retirement plan provider. The program is funded by employee contributions, which are deducted automatically from their paychecks. CalSavers is a payroll deduction Roth IRA, which means contributions are made post-tax.

How Does CalSavers Work?

As an employer using CalSavers, you’ll have some steps to take to get started along with ongoing responsibilities. After you register for CalSavers, you’ll need to upload your roster of eligible employees. Then, your role in the CalSavers program is to facilitate your employees’ contributions. This means you’ll need to deduct the contributions from your employees’ paychecks and send them to CalSavers. You’ll also need to manage your employees’ enrollment in the program, including tracking who’s participating and who’s opted out.

Remember, you’ll have the ongoing responsibility of keeping your account current. This means you need to update employee contribution rates when employees make changes, add new employees within 30 days of their hiring or when they become eligible, and mark employees as inactive if they leave or are terminated. Additionally, you’ll continue to process payroll contributions for participating employees.

Who Needs to Comply with CalSavers?

If you’re an employer with 5 or more employees in California and you don’t already offer a retirement plan, you’ll need to register with CalSavers or offer a retirement plan through a provider of your choice. If you don’t, you could face steep penalties. The penalties for non-compliance start at $250 per employee and can go up to $750 per employee.

CalSavers compared to 401k plans and PRPs

CalSavers is not your only choice when it comes to offering a compliant retirement benefit. The two other plan types that comply with the mandate are a 401k and a PRP.

The familiar 401k plan was created to replace pension plans at large companies. It allows employees to contribute a portion of their income, pre-tax, into a retirement account. Many small businesses find that the 401k is cost-prohibitive and that they don’t have the resources to manage them. As an employer sponsoring a 401k plan, you become a fiduciary to your employees and can be sued if you don’t act in the best interest of the plan participants. 

PRPs (Portable Retirement Plans) are a new type of retirement plan offered by Icon. PRPs work like a 401k but without the high cost, regulatory complexity, and fiduciary burden. Both 401k plans and PRPs offer tax-advantaged savings and automatic payroll contributions, but PRPs have some big advantages: 

  • No federal filings or reporting
  • No fiduciary burden
  • Flat monthly cost, predictable pricing
  • No rollover required
  • No ERISA bond

The PRP by Icon is an easy and affordable way to meet the California mandate. With a PRP you can meet the California retirement mandate and provide your employees with a valuable retirement savings plan without the hassle and complexity of 401k plans.

Frequently Asked Questions

1. How can I ensure I’m in compliance with the California retirement mandate?

To ensure you’re in compliance with the mandate, you can either offer a qualifying retirement plan (like the PRP by Icon) or register to facilitate CalSavers. If you choose to offer a PRP, we’ll provide the documentation you need to show you’re in compliance.

2. How does the PRP compare to CalSavers?

PRPs by Icon are fully automated, removing the administrative burden from employers. You can set up your plan in minutes, and we integrate with your banking and payroll partners. Once you launch your plan, we handle the rest, including employee enrollment and communications. You’ll get access to your employer dashboard so that you can easily review and monitor your plan.

CalSavers offers a limited number of investment options. With Icon, employees get a portfolio tailored to their needs, giving them a more personalized plan that is managed for them. Plus, while CalSavers may not cost employers any money, the fees charged to employees are higher and the employer will spend their time with the ongoing responsibilities of managing CalSavers.

3. How can I get started with Icon?

Getting started with Icon is easy. Just visit our website, click on “Get Started,” and follow the prompts to set up your plan. We’ll guide you through the process and provide all the support you need. Signing up only takes about 5 minutes.

4. What if I already offer a retirement plan to my employees?

If you already offer a retirement plan, you can still switch to Icon – it’s easy, and we’ll help you make the change

5. What are the benefits of offering a retirement plan to my employees?

Offering a retirement plan can help attract and retain top talent, improve employee satisfaction, and provide a tax-advantaged way for your employees to save for retirement.

6. How can I educate my employees about retirement savings?

If you choose Icon’s PRPs, we provide educational resources and support to help your employees understand their retirement savings options. Educating your employees about retirement savings is important for their financial future.

7. What if my business grows and I have more employees?

With Icon, we scale with you. Whether you have 5 employees or 500, we make it easy to offer a retirement plan.

Get in Touch

We’re here to help! If you have any questions or need a hand navigating your retirement plan options, don’t hesitate to get in touch with us. We’re here to help you find the best solution for your business.