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.