Category: Retirement Benefits

Understanding CalSavers: A Comprehensive Guide for Resources for Employers 2024

Posted on April 28, 2025 by Laurie Rowley - Retirement Benefits

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.

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Small Business 401k Provider Alternatives: The Future of Retirement with PRPs

Posted on October 11, 2024 by Laurie Rowley - Retirement Benefits

As a small business owner, you want to take care of your employees, grow your company, and stay ahead of the competition. But let’s face it: the 401k, especially for small businesses, is outdated. It’s expensive, complicated, and designed for a corporate world that no longer exists. It’s time to rethink retirement benefits, and that’s why the Portable Retirement Plan (PRP) was created. It’s the solution built for the future.

Why the 401k Fails Small Businesses

Here’s the truth: 401k plans were not designed for small businesses. They were created for massive corporations that have the resources to manage the legal hoops, compliance testing, and fiduciary risks. Most small business owners simply don’t have the time, money, or bandwidth to deal with the complexities that come with offering a 401k.

Here’s why small businesses struggle with 401ks:

High Costs: From administrative fees to compliance and investment management costs, a 401k plan is expensive to maintain. For small businesses, these fees can eat up precious resources.
Complex Regulations: 401k plans require adherence to strict IRS and Department of Labor regulations. This includes annual compliance testing to ensure fairness across all employees. Navigating these regulations is time-consuming and a headache for small business owners.
Fiduciary Responsibility: Offering a 401k means you are legally responsible for your employees’ retirement funds. Even if you work with a provider, some fiduciary duties remain on your shoulders, exposing you to potential legal risks.
Limited Flexibility: Small businesses tend to have a mobile workforce with high turnover. Traditional 401k plans don’t offer the flexibility needed for employees who frequently switch jobs, and the rollover process can be a hassle.

Safe Harbor 401k Plans: A False Safety Net

Many small businesses turn to Safe Harbor 401k plans because they automatically pass IRS non-discrimination testing, ensuring the plan benefits all employees, not just the top earners. In fact, 70% of SMBs choose Safe Harbor plans to avoid failing compliance tests.

But here’s the catch: Safe Harbor plans require mandatory matching contributions for all employees, regardless of whether your business can afford it. These contributions typically range from 3-4% of each employee’s salary. So, while Safe Harbor plans save you from compliance headaches, they can significantly increase costs, especially as your business grows.

For a small business, that mandatory match can put a serious strain on resources. The more employees you have contributing, the higher the cost burden on your business.

The PRP: The Game-Changer for Small Businesses

This is where the Portable Retirement Plan (PRP) comes in. It’s a modern, flexible, and affordable alternative to the traditional 401k. Here’s why it works for small businesses:

Lower Costs: Forget the surprise fees that come with a 401k. PRPs offer predictable, lower costs with simple, flat fees—whether monthly or annually. You’ll never be blindsided by hidden charges or required matching contributions.
Simplicity: PRPs remove the administrative burden that comes with 401ks. There’s no need for annual compliance testing, and no complicated IRS regulations to navigate. It’s built for ease of management.
No Fiduciary Risk: One of the best things about a PRP is that it eliminates fiduciary responsibility for the employer. When you work with a provider like Icon, they assume fiduciary duties on behalf of your employees, saving you from legal risks and the need for costly fiduciary insurance.
Portability for Employees: PRPs address one of the biggest flaws in the 401k—the portability problem. Employees can take their retirement savings with them wherever they go, without needing to roll over accounts.

Why PRPs are the Future

The PRP isn’t just an incremental improvement. It’s a breakthrough. This is what the 401k should have been—a flexible, affordable, and portable retirement solution for the modern workforce. And now, it’s available to every small business, not just the big guys.

By embracing the PRP, you’re not just offering your employees a retirement plan—you’re providing them with a future. And you’re doing it without sacrificing your time, money, or peace of mind.

So, ask yourself: Do you want to keep using the same outdated tools that hold your business back, or do you want to be part of the future of retirement planning?

Understanding the 401k Tax Credit for Small Business Owners

Posted on May 14, 2024 by Laurie Rowley - Retirement Benefits

If you’re a small business owner considering a 401k plan for your employees, navigating the intricacies of tax credits and setup costs can be daunting. To simplify this process, let’s break down the 401k Setup Tax Credit and what it really means for your business.

1. Eligibility and Covered Expenses:

Small businesses with 100 or fewer employees who earned at least $5,000 last year and have not had a retirement plan in the past three years qualify for this tax credit. The credit can help cover the initial costs associated with setting up the 401k plan, including administrative fees and employee education about the plan.

2. Amount of the Credit:

You can claim 50% of your setup costs, up to a maximum of $5,000 per year for the first three years. This means the total potential savings could reach up to $15,000.

3. Upfront Costs:

Despite the tax credit, you’ll need to pay all initial costs of setting up and administering the plan. These expenses include fees for plan setup, administrative services, and employee training sessions on plan benefits.

4. Claiming the Credit:

After paying these initial costs, you can claim the tax credit when you file your annual business taxes. This credit reduces your tax liability; however, if the credit amount is more than your tax due, the excess won’t be refunded and can’t be carried to other tax years.

5. Ongoing Costs After Credit:

It’s crucial to understand that after the first three years, you’ll be responsible for all ongoing costs of the plan. These include yearly administrative fees and any other expenses necessary for maintaining the plan.

6. Fiduciary insurance:

Employers need fiduciary insurance for their 401k plans to protect themselves against liability for breaches of fiduciary duties. Managing a 401k involves making critical decisions about plan management and investments, and fiduciary insurance helps cover legal fees, settlements, and other costs arising from claims of mismanagement or negligence.

7. Shutting down a 401k plan:

Shutting down a 401k plan can be a complex and costly process, requiring meticulous administrative work. This includes filing final forms with the IRS, distributing all assets to participants, and possibly incurring penalties for early termination. The decision to close a 401k is significant, both in terms of procedural burden and financial impact on the employer.

Practical Implications for Small Business Owners:

Financial Planning: Ensure you have the necessary upfront cash to cover the initial setup costs. The tax credit is beneficial, but it doesn’t provide immediate cash flow since it only affects your tax liabilities when you file.
Long-term Budgeting: Plan financially for the ongoing costs of maintaining the plan beyond the initial three years.
Business Cash Flow: Assess your business’s cash flow to ensure it can handle the recurring costs of the 401k plan without relying solely on the tax credit.

Additional considerations:

New 401k plans require auto-enrollment of all employees.
Matching contributions have to be paid to all employees in a safe-harbor plan.
401k plan audit costs should also be factored into your budgeting considerations.

As you consider setting up a retirement plan for your small business, it’s essential to explore all your options. While the 401k Setup Tax Credit may provide an incentive, it’s worth noting that these plans can still be financially burdensome in the long run. At Icon, we offer an alternative solution with our Portable Retirement Plan (PRP). Designed to be both high-quality and affordable from the start, the PRP eliminates the need for tax credits while still providing your employees with a robust retirement savings option. By choosing the PRP, you can enjoy the benefits of a top-tier retirement plan without the hefty price tag, helping lead your business and your employees to a more secure financial future.

Secure Your Employees’ Retirement with Icon: The Easy and Affordable Retirement Plan Solution for Small Businesses

Posted on September 21, 2023 by Laurie Rowley - Retirement Benefits

Are you worried about retirement savings? You’re not alone. According to a recent study by the Employee Benefit Research Institute (EBRI), only 52% of workers are confident they’ll have enough money for retirement. But there’s good news – offering a retirement plan to your employees can help.

At Icon, we understand that offering a retirement plan can be a daunting task for small business owners. That’s why we’ve created a solution that’s easy to set up, affordable, and designed specifically for businesses like yours. Our Icon Portable Retirement Plan (PRP) is the perfect choice for small and medium-sized businesses looking to offer a retirement plan.

Our plan is fully automated and can be set up in just 5 minutes. We take care of the regulatory complexity and fiduciary burden that comes with traditional retirement plans. And best of all, our plan is a turnkey solution for you and your employees at a fraction of the cost of a 401k plan. With the Icon PRP, you can offer your employees a retirement plan that’s easy to manage and cost-effective.

But why offer a retirement plan in the first place? The EBRI study found that workers who have access to a retirement plan are more likely to save for retirement. In fact, 87% of workers who have access to a plan participate in it, compared to just 44% of workers who don’t have access. And workers who participate in a plan are more confident about their retirement savings – 72% of participants are confident, compared to just 42% of non-participants.

Offering a retirement plan can also help you attract and retain top talent. The EBRI study found that retirement savings is the most wanted benefit after healthcare. By offering a plan, you can show your employees that you care about their financial well-being and help them save for their future.

The Icon PRP is designed specifically for small and medium-sized businesses. It’s easy to set up and manage, and it’s a cost-effective solution that helps you attract and retain top talent.

Schedule a call with us today to learn more about how we can help you offer a retirement plan that works for you and your employees. We’re here to help you achieve your business goals and ensure a brighter future for your team.

How Companies can Improve Recruitment and Retention Without Increasing Cost

Posted on July 25, 2023 by Laurie Rowley - Retirement Benefits

Recruitment and retention of talent is important whether you’re facing a global pandemic, a looming recession, a hot job market, or another headwind. But raising wages isn’t always an option and we’re here to tell you: that’s ok.

You don’t have to raise wages to get and keep good people. Why? Because wages are not the most important factor when it comes to recruitment and retention. Research has shown that people want to feel valued, appreciated and acknowledged for their contribution; for who they are. People want to feel seen at their jobs and companies that can accomplish this see a higher lift in retention than those that simply raise wages.

So how do you make your employees feel valued, appreciated and acknowledged? You offer benefits that help solve the challenges they face, you communicate those benefits in a way that allows employees to see their value, you engage your employees on a human level, and you measure your efforts to see what’s been successful and what hasn’t.

Offer the Right Benefits

Benefits are the second most important factor when candidates choose a job and trust and engagement with the company are among the most important reasons they stay. And since utilization of benefits is one of the most important ways employees engage with a company, it’s important to put together the right benefits package for your employees. This is how you do that:

Regularly survey your employees. You can ask them the specifics like: “Do you want a PPO or an HMO?” but don’t stop there. Ask them about their emotions and behavioral factors as well. Ask questions like, “How much stress do you feel in your everyday life?” And, “What are your top concerns for your goals for the next year?” By asking broader questions about employees’ lives, stressors and emotional states, you can craft a benefits package that will bring real value to their lives. This will increase their trust that the company cares about them and increase their engagement with the company by ensuring they use the benefits that are being offered.
Simplify your benefits. At Icon, we’ve seen that people across the income spectrum (even those at the lowest end) will save for retirement if the savings program is easy to use and understand as well as automatic. So audit your benefits offerings and ask yourself, “Have we provided a way for people to automatically save for their future?” And, “Is our benefits portal easy to use and understand?”
Give them a way to save. Financial stress is at an all time high with 73% of employees reporting that they feel this type of stress on a regular basis. It contributes to absenteeism and presenteeism (where people are present at work but not productive) which costs companies an estimated $4.7 billion per week. By giving employees an easy, low-cost, and automatic way to save for their future, like with an Icon Savings Plan, you can help them get on solid financial footing and lower that stress.
Make sure you’re not paying too much. The cost of offering different benefits will vary depending on the benefit type and the size of your company. But the average 50 person company shouldn’t pay more than $2,500-3,000 annually to offer a retirement savings plan. Icon’s retirement savings plan is the most affordable way to offer your employees a retirement benefit.

Increasing or changing your benefits offerings might seem like it adds to your operational costs, but each employee you lose will cost the company between 6 and 9 months’ salary (on average) to replace them. So if you can keep more people by adding a benefit they value, it could actually save you money in the long run.

Communicate Those Benefits Clearly

Sometimes employee satisfaction with (and utilization of) benefits is low because your people haven’t made the connection between the benefit itself and the value it can bring to their lives. One of the easiest and low-cost ways to help them make that connection is to change how you communicate about your offerings. You want your communication around your benefits package to be:

Clear, using jargon-free language.
In a medium that works for their demographic. Options are digital resources, physical brochures, live events, etc.
Connected to the emotional, human side of the benefit.
Use testimonials and case studies when you can.

At Icon, we offer the full spectrum of communication materials so that when we onboard a new customer, we can meet their communication needs. We infuse our communications with behavioral finance research and simple messaging to drive home the value of the benefit. This improves retention efforts because it:

Increases employee trust. When employees make the connection between the benefit they’re being offered and the value it will bring to their lives, they feel more supported. This builds trust that their employer cares about them.
Increases engagement with the employer. Utilization of benefits is one of the most important ways employees engage with their employer. By helping employees to make the connection between the benefit they’re being offered and the value it will bring, you can increase the likelihood they’ll use it.

Engage with Employees on a Human Level

Research has shown that the greatest lift in retention can come from simply making their employees feel appreciated and acknowledged for the contributions they’re making. This appreciation and acknowledgement can have a financial component (e.g. a bonus), but it doesn’t have to. Here are some non-financial ways to engage with your employees:

Have one-on-one meetings with employees on a quarterly basis. Don’t let it just be a performance review, but ask them how they’re doing as well as how the company can support them.
Show empathy for their lifestyle needs. This might look like scheduling their shifts for locations or times that are better for them, or allowing them to work from home on certain days.
Give public acknowledgement of a job well done. This could include shout-outs in Slack or the monthly company newsletter. It could be starting an “Employee of the Week” award. Think about your company culture and choose a way to publicly acknowledge your employees’ accomplishments (both professional and personal) in a way that makes sense.

Measure Your Efforts

To make sure your efforts are successful, you’ll want to track certain metrics. These include:

Number and quality of applicants per job posting.
Ratio of applicants to booked interviews.
Job acceptance rate.
Average tenure.
Turnover rate.

Bottom Line

If you want to improve your recruitment and retention efforts, you have to make your employees feel supported, valued and acknowledged. You can do this by offering benefits that your employees value, helping them to utilize those benefits with clear and effective communication and regularly engaging with them. If you’re looking for a cost-effective, retirement savings benefit your employees will truly value, reach out today.

How to Terminate a 401k Plan

Posted on July 7, 2023 by Laurie Rowley - Retirement Benefits

As an employer, you may have decided to shut down your 401k plan for various reasons. It could be due to financial difficulties, regulatory complexity, or simply because you want to switch to a different retirement plan.

Whatever the reason may be, here’s a simple overview of what’s generally required to terminate a 401k plan (note: check with your plan provider to understand what’s needed for your particular situation):

Notify Plan Participants: The first step is to inform your employees about the plan’s termination. This notice should include the date when the plan will terminate, the reason for the termination, and any important details that participants need to know, such as how to withdraw their funds or roll them over to another plan.
Cease Contributions: Once you have notified your employees about the plan’s termination, you need to stop making contributions to the plan. This includes both employer and employee contributions. You can set a deadline for when these contributions will stop, and make sure that all contributions are made before this date.
Distribute Funds: The next step is to distribute the funds in the plan to your employees. You can do this by offering them a lump sum payment or by allowing them to roll over their funds to another qualified retirement plan. You must provide your employees with all the necessary paperwork and information they need to make an informed decision about their funds.
File Form 5500: Finally, you need to file Form 5500 with the IRS to formally terminate the plan. This form includes details about the plan’s assets, participants, and contributions, and it must be filed by the deadline. Failing to file this form could result in penalties and fines.

While terminating a 401k plan can be a difficult decision, there are smart alternatives available. At Icon, we’re helping employers that want a simple and cost-effective way to offer retirement benefits to their employees. With low fees and a user-friendly platform, and no plan testing or federal filings, Icon is a great alternative to traditional 401k plans.

NDT Testing: What Happens if Your Company Fails and How to Remedy It

Posted on May 12, 2023 by Laurie Rowley - Retirement Benefits

If you’re an employer that sponsors a retirement savings plan, Non-Discrimination Testing (NDT) is an important administrative task you need to perform annually. Failing the test can result in serious financial consequences for the company. In this post, we’ll discuss what NDT is and how to conduct it. We’ll also go over what to do if your company fails the test and some tips to help your plan stay ERISA-compliant.

What is NDT Testing?

NDT testing is a set of tests designed to ensure that your 401k plan is in compliance with ERISA rules and regulations. It measures whether the plan is administered fairly and doesn’t overly benefit highly compensated employees (HCEs) or Key employees. There are three types of NDTs that you must complete annually, except for Safe Harbor plans which are exempt.

Why is NDT Required on an Annual Basis?

NDT was created to prevent company owners and highly compensated employees from unfairly receiving generous tax benefits. Because compensation and contribution levels change annually, it’s important to complete the tests every year to ensure the plan is ERISA-compliant.

What Happens if Your Company Fails the NDT?

Failing the NDT is common but requires immediate action to remedy the situation. Audit your employee classifications to ensure they’re correct. If your plan failed the ADP or ACP, one remedy is to make qualified, non-elective contributions to non-highly compensated employee plans. Here you’ll find remedies provided by the IRS.

Tips to Help Your Plan Stay ERISA-Compliant

If you can afford it, you can implement a Safe Harbor plan to avoid NDT requirements altogether. Also, choose an administrator with an informative dashboard and simple, clear interface to make it easy for employees to engage with their 401k. You can also provide non-highly compensated employees with continuing education on the importance of saving for retirement. Notify HCEs of their contribution limits and monitor contributions throughout the year, communicating any changes.

The easiest way to avoid NDT? Switch to a Portable Retirement Plan (PRP) like Icon, which is an IRA-based retirement plan that simplifies administration and reduces costs. PRPs are not subject to ERISA rules and regulations – that means no annual reporting and no NDT requirements.

The Bottom Line:

Even with diligence, it’s common for companies to fail their annual NDT. If this happens to you and your company, take immediate action to remedy the discrepancy and then consider offering a Portable Retirement Plan. A PRP is the most cost-effective way to offer employees the opportunity to save for retirement.

Why we need an alternative to the 401k

Posted on April 20, 2023 by Laurie Rowley - Retirement Benefits

While there is no federal mandate that all companies with 5 or more employees offer workers a retirement savings plan, many states do require this. And it’s just good business. More than 60% of employees we surveyed responded they feel stressed about their finances and it’s estimated that employee stress costs U.S. companies $4.7 billion per week. Offering your employees a way to save for retirement is a key way you can help lower their financial stress as well as bolster your recruitment and retention efforts. But the 401k isn’t always the best way to do it. Here’s why.

The Problems 401ks Cause Employers

The 401k was created 50 years ago as a supplemental retirement plan to the pension as large companies began to phase out this type of employment arrangement. It was meant for large companies with a workforce that stayed put for decades. Because of this, the regulations that rule the 401k space create an inflexible, expensive plan and annual testing requirements that are easy for small and medium-sized businesses to fail. Even large companies experience problems with offering a 401k to their workforce. These are some of the most common problems 401ks cause employers:

Expensive annual non-discrimination testing. Every year, every company that offers a 401k must run a test to ensure their plan doesn’t unfairly benefit their high earning or key employees. If they fail this test they must either give back the requisite contributions to their high earners or key employees, and said employees will pay taxes on those amounts. Or they can make the necessary contributions to their non-high earning employees. It’s also common for small and medium sized companies to fail their compliance testing because they typically have a larger percentage of “rank and file” employees that contribute lower amounts to their 401ks.
Employers retain fiduciary duty to employees. As part of this duty, employers must make sure the fees charged to their employees are reasonable, the plan offers a sufficient amount of diversification and there are no conflicts of interest. For small and medium employers this is a very challenging threshold to meet because plan participants at their companies are more likely to be charged higher fees than employees at larger companies. Because fiduciary lawsuits have ballooned in the last 10 years, many companies have started carrying ERISA fiduciary liability insurance (which is an added operational cost).
Plans are expensive and complicated to set up, administer and maintain.
Lack of portability leads to abandoned accounts. Since 401ks are tied to the employer, when employees leave they must either complete a complicated and costly rollover to their new employer’s 401k plan, cash out their balance or abandon their plan. Every year, 2.8 million accounts are abandoned which can cost employers additional fees and may require special handling.

The 401k No Longer has a Product-Market Fit with Modern Workers

Anyone who has started a new company or built or created a new product knows that one of the essential milestones to success is finding “product-market fit”. This is when your target demographic is buying, using and proselytizing your product and usually happens when you have figured out how to sufficiently solve a key problem for them. The 401k had product-market fit with boomers because they stayed at the same company for decades. For employees who move around a lot, or who are contract workers, it’s no longer an adequate solution. And there are more of them than you think.

In fact, in the last 10 years 94% of net employment growth came from 1099s and in 2025 it’s estimated that 50% of the workforce will be 1099 workers. That means 50% of the workforce won’t be eligible to contribute to a 401k.

Beyond that, millennials and Gen Z employees stay an average of 2.75 years at each company. If they work for 40 years, that’s about 15 companies. Which means they’ll have to keep track of 15 401ks or complete 14 rollovers in order to fully take advantage of their retirement savings plans. It’s no wonder that $92 billion in assets are cashed out each year at job change.

In addition to the non-portability of the 401k, and the fact that it won’t even be available to half the workforce in a few years, this type of retirement plan carries high fees that eat into participants’ savings and investment portfolios that are predetermined by their employer. This means the types of assets they can buy are limited and might not fit their needs.

The modern worker needs a retirement plan that:

Moves with them from job-to-job-freelance-back to job.
Charges low fees so they can keep more of their savings.
Offers personalized investment options that can fit their diverse needs.
Is easy to use.
Is offered by their employer.

Icon is the Right Product Fit for the Modern Worker

Icon solves the problems inherent in a 401k for both the employer and employee alike.

For employers Icon:

Removes the fiduciary burden. Icon’s is an IRA-based plan so employers aren’t bound by ERISA regulations. Icon is an SEC-registered investment adviser and retains the fiduciary liability.
Removes the annual testing requirement. Again, since our plan is IRA-based, there are no non-discrimination rules to comply with.
Offers a turnkey retirement savings solution with a low, transparent fee structure.
Provides employee onboarding and education.
Provides companies with a clear and informative dashboard for easy plan monitoring.

For employees Icon:

Provides a portable retirement savings plan they never lost access to.
Provides high-quality, personalized and low-cost investment portfolios.
Provides access to a workplace retirement savings plan for every worker, even contractors.
Offers a clear and informative dashboard and app for easy plan management.
Gives them an easy and automatic way to save for their future.

Icon is the most cost effective way for companies to offer employees a retirement savings plan. If you’re interested in an alternative to the traditional 401k, reach out today.

Should Your Business Switch from CalSavers to Icon?

Posted on March 31, 2023 by Laurie Rowley - Retirement Benefits

California law requires all employers with at least one employee in California to offer a retirement plan to their workers. The law was passed to help workers save for retirement, as many Californians were not saving enough to support themselves in their later years. Employers have two options to comply with this mandate: they can either use the state-run CalSavers retirement plan or they can choose a private-sector plan like Icon.

While CalSavers may seem like a good option, there are several reasons why small businesses should consider switching to Icon.

1. Icon is a Fully Automated Plan

Icon retirement plans remove the administrative burden from employers. You can set up your plan in minutes and we integrate with your banking and payroll partners. Once your plan is ready, we handle everything for you, including all enrollment and employee communications. You’ll have an easy to use dashboard so that you can easily review and monitor your plan.

And unlike with a 401k plan, Icon plans never require plan testing, federal filings, and never make the employer the fiduciary. Icon is a payroll deduct IRA with auto-enrollment. Employees can opt out of the plan if they choose not to participate.

2. We’re a Fiduciary

One of the main benefits of using a private-sector retirement plan like Icon is that we’re a fiduciary with oversight of the investments. CalSavers offers only a limited number of investment options, which may not meet the needs of all employees. With Icon, employees’ savings are invested in a portfolio tailored to their needs. This allows employees to have a more personalized plan that is automatically managed for them. Employees can easily track their plan details through an easy to use interface.

3. Lower fees

Another advantage of Icon is lower fees compared to CalSavers. While CalSavers fees are reasonable for the employer, they are higher than what many private-sector plans charge for the employee. Icon offers competitive pricing, which can help small businesses save money in the long run. Lower fees can also mean higher returns on investments, which can be a big benefit to employees.

4. Better customer service

Many small businesses may find that Icon offers better customer service than CalSavers. This is because we have dedicated representatives who can assist with setting up and managing retirement plans. This can be especially helpful for small businesses that may not have a dedicated HR department. Additionally, Icon may offer more personalized service and support, which can help employees make informed decisions about their retirement savings.

In summary, while CalSavers may seem like the easier option, small businesses should consider switching to Icon to take advantage of the investment options, lower fees, better customer service, and flexibility. By offering a retirement plan like Icon, small businesses can help their employees save for a secure retirement and stay competitive in today’s job market.

How to Comply with the California Retirement Mandate

Posted on March 30, 2023 by Laurie Rowley - Retirement Benefits

In 2016, California passed legislation that requires all employers with five or more employees to offer a retirement savings plan. The goal was to address the retirement savings crisis in California, where approximately half of all private sector employees do not have access to a retirement savings plan at work. Employers have three main plan types that comply with the mandate: a 401k plan, CalSavers, and Icon Savings Plan.

A 401k plan is a well-known, widely used traditional retirement savings plan. It allows employees to contribute a percentage of their income, pre-tax, into their account. Employers can also choose to match a portion of their employee’s contributions. However, 401k plans can be expensive to set up and maintain, and smaller businesses may not have the resources to manage them.

Calsavers is a state-run program that was created to help small businesses offer a retirement savings plan to their employees. Calsavers is a payroll deduction Roth IRA, which means that contributions are made post-tax. Calsavers has no setup fees, but there is some administrative complexity that places a burden on employers. It is also very expensive for the employee that is contributing. In a recent study, two-thirds of employees indicated they prefer a private retirement plan over a state-run plan.

The Icon retirement plan is another option for small businesses to comply with the California retirement savings mandate. It’s an innovative retirement savings plan that was specifically designed for small businesses. It’s easy to set up and maintain, with low fees and no hidden costs for employers and employees. Unlike Calsavers, Icon Savings Plan is a fully digital, turnkey plan that easily integrates with banking and payroll providers, removing all administrative burden from employers.

Icon Savings Plan also offers several unique features that make it the best option for small businesses. For example, it offers flexible contribution options, allowing employees to contribute a fixed dollar amount. It also offers a personalized investment experience, with investment options tailored to each employee’s risk tolerance and investment goals. In addition, Icon provides employees with access to financial wellness tools and resources, such as educational materials and live events with retirement specialists.

Overall, Icon Savings Plan is the best option for small businesses that want to comply with California’s retirement savings mandate. It is affordable, easy to set up and maintain, and offers unique features that can help employees save more for retirement. By offering a retirement savings plan like Icon, small businesses can not only attract and retain talented employees and help secure their financial future, but remain compliant in the eyes of California as well.