Tag: Calsavers

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.

Whether you’re a California-based company with 5 or more eligible employees, or you’re a company with 5 or more California-based eligible employees, June 30th was an important deadline for you. By this date, by law, you were supposed to have either enrolled your eligible employees in the CalSavers retirement plan or sponsored your own plan. 

If you didn’t, you might be subject to fines. If you did, and you went the CalSavers route, you might be running into some user-satisfaction issues. Icon can help you deal with both.

I Missed the June 30 Deadline, Now What?

If you missed the June 30 deadline and didn’t set up your eligible employees with a retirement plan, we have two pieces of good news. First, you still have time before fines are assessed. In fact, you have 90 days from the deadline (September 28th) to get your retirement plan up and running before you’ll have to pay any fines. 

Second, Icon is an easy and cost-effective way to comply with the CalSavers mandate, we can get you signed up and onboarded in minutes. We are a payroll IRA that links with your payroll provider to take employees’ contributions directly from their paychecks. Since we’re an automatic enrollment payroll deduct IRA and not a 401k, there’s no financial reporting or fiduciary responsibility on your part and we take on the administrative duties of employee onboarding and communication and plan maintenance and administration. All you need to do is provide your payroll information and approve employees’ contributions.

If you choose not to sign your employees up for a retirement plan within 90 days of the June 30 deadline, you will be subject to fines of $250/eligible employee. If, at 180 days after the June 30 deadline, you still haven’t provided your employees with a way to save for retirement, fines of $500/eligible employee will be levied against your company.

Beyond the financial penalties, you might find it difficult to attract and retain employees unless you can offer them a retirement savings benefit. The consultancy firm, WTW, recently surveyed employers of various sizes, across several industries, and found that 55% of the companies expected to have retention issues in the next two years. And 36% were planning to use their retirement benefits package as a way to attract and retain talent. So if you want to compete, you will need a retirement plan that employees will actually want to use. 

Icon is that plan. With low fees, and easy plan management, Icon’s retirement plan is user friendly and customizable so every worker can find what they’re looking for. On top of that, employees own their Icon plan and can take it with them wherever they go. They never lose access to it, retaining the ability to both contribute to and manage their retirement savings plan no matter where they work.

I Signed up for CalSavers Before June 30, am I Stuck with It?

CalSavers has helped get more California workers saving for retirement, and that’s a good thing. But it’s far from the ideal retirement plan. Many employers and employees alike have found it to be a challenging system to navigate and inflexible. CalSavers also charges asset-based fees of between 0.825% and 0.95%, whereas Icon’s average fund fee is 0.07%. Lower fees help your employees grow their savings faster.

So if you signed up for CalSavers but you’re unsatisfied with your choice, we have good news. You can unenroll your employees from CalSavers and roll their accounts into an Icon retirement savings plan. Icon makes account management easy with a clean and informative dashboard. We also make it easy to rollover old accounts so your employees can start saving more, faster.

If you’re interested in rolling your CalSavers accounts into Icon retirement savings plans, reach out to a representative today. We’ll walk you through the process.

Why You Need to Offer Your Employees the Right Retirement Savings Plan

To be successful, companies need healthy, focused, talented, and productive workers. They need to retain those workers so they’re not constantly recruiting and training new people, and suffering lost productivity due to losing institutional knowledge. In order to attract and retain the talent, companies need to be successful and give employees the support they need. According to a recent survey by PwC, support means caring about employees’ financial well being. 

PwC surveyed more than 3,000 workers across various industries and found that 56% were stressed about their finances and 1 in 4 had less than $1,000 saved for retirement. The workers who were stressed about finances reported using up to 3 hours of work time or more to deal with their financial worries, 18% said it had negatively affected their productivity at work and 15% said it had negatively affected their attendance. On top of that, 76% of the financially stressed employees said they were attracted to another company that cared more about their financial well being. 

Many workers are struggling and one way employers can help them feel in control of their financial future is to offer a retirement plan that makes saving easy. Since Icon charges low fees, employees will see their savings grow faster, which can give them a sense of security. Icon’s plan is easy to understand and use and we offer support to both plan participants and employers so everyone has the opportunity to be successful in reaching their financial goals.

If you’re an employer of California residents, you’re probably keenly aware of the June 30th CalSavers deadline. It might have you scrambling to set up your workplace retirement savings plan, or maybe you’re ahead of the curve and already have a plan in place. Either way, there are 5 things you need to know as this all-important date approaches.

1. The CalSavers deadline most likely applies to you. Over the past couple of years, the state of California has been gradually lowering the employee threshold at which it requires employers to offer a workplace retirement plan. If you have more than 100 employees, your deadline was September 2020; more than 50 employees, your deadline was June 2021 and now, if you have 5 or more California employees, your deadline to offer a retirement savings plan to your people is June 30th of this year. The mandate applies as long as at least one of your employees is 18 years of age or older

2. CalSavers is only for California-based employees. If you are one of the many companies that saw their workforce scatter during the pandemic, you have a choice to make. You can set up state-based retirement savings plans in every state in which you both have employees and one is available and required. Or, you can find a singular solution in the private market, like Icon.

3. There are financial penalties for not complying with the June CalSavers deadline. If you haven’t set up a workplace retirement savings plan for your California employees within 90 days of the June 30th deadline, you will be assessed a fine of $250 per eligible California employee. If you still haven’t enrolled your company in a plan by 180 days after the June deadline, you will be assessed an additional $500 per eligible employee.

California employees are considered eligible if they are: 1) Age 18 or older and 2) considered an employee under California law. The number of hours worked per week or their tenure is not a factor into their eligibility. You must upload all employee information to the CalSavers website within 30 days of their start date. Employees will then be automatically enrolled in the program if they do not opt out within 30 days thereafter.

While California law doesn’t require that you offer a workplace retirement plan to 1099 workers, Icon’s savings plan gives you that ability. With Icon, all workers, regardless of status, have the opportunity to save for retirement through automatic payroll deductions

4. CalSavers accounts have default settings that may not benefit all employees. 

• The default account type is a Roth IRA. The default account type for CalSavers accounts is a Roth IRA which carries with it income limits based on tax filing status. In 2022, those limits are: $214,000 for a married couple filing jointly and $144,000 for single filers. If account holders earn above the income limit, they aren’t eligible to contribute to a Roth IRA and if they do so, they will have to unwind their contributions. 

Account holders pay income taxes on Roth IRA contributions (although they don’t pay income taxes on the distributions they take later). 

Account holders have the option to change their account type to a Traditional IRA, but they must take it upon themselves to do so.

• The default savings rate is 5%. Unless account holders designate a different contribution rate, 5% of their paycheck will be automatically deposited into their CalSavers account. Some workers may not be able to afford a 5% contribution and will thus be unpleasantly surprised if they’re not made aware of this default setting.

• Employees are automatically enrolled in the CalSavers retirement plan. California law states that employers must automatically enroll all eligible employees in the CalSavers program (if that’s the company’s chosen retirement plan). Employees must then take it upon themselves to opt-out if they don’t want to participate. This could leave some employees feeling like it’s a hassle to manage their account or it could take them by surprise should they either forget to opt-out.

5. Think a private market retirement savings program is a better fit for your company? You can un-enroll your company from CalSavers. If you signed up for CalSavers ahead of the June 30 deadline but you now see you have better options, you can unenroll from the program. You just need to contact CalSavers directly and they can help you through the process.  

Icon is helping small and mid-sized companies to both comply with California law and offer their employees an easy and inexpensive way to save for retirement. The initial set-up for both employers and employees takes minutes, then Icon takes care of the rest. We handle employee education, investment management, communication with your payroll service, and we carry the fiduciary responsibility to the employees so all you have to do is upload employee information and approve their contributions. Icon is the easiest, quickest, and most affordable way to comply with the California June 30th deadline.

California law now mandates that you must offer a retirement plan.

Millions of California residents don’t have an employer-based retirement plan and have no retirement savings. So, to make sure that everyone has access to a workplace retirement plan, California passed a new law that applies to for-profit and nonprofit businesses.

It states that if you don’t offer an employer-sponsored retirement plan—and you have five or more employees—you must either offer a retirement plan or participate in in the state-run plan called CalSavers.

The state mandate has a three-year phased rollout with staggered deadlines for registration, based on your company’s size.

• If you have over 100 employees the deadline was September 30, 2020.

• If you have over 50 employees the deadline was June 30, 2021.

• If you have 5 or more employees the deadline is June 30, 2022.

What’s the CalSavers plan?

The CalSavers program is a retirement plan controlled, offered, and managed by the State of California.

If you don’t offer a qualifying company retirement plan, you’ll need to enroll in CalSavers for your employees. CalSavers is an IRA-based plan that requires all employees to be automatically enrolled. Employees can opt out of CalSavers.

How much does CalSavers cost?

Your employees will pay plan administration fees that can range from 0.85% to .95% these fees will be deducted directly from the assets in their retirement plan.

There are no fees for employers and CalSavers requires no matching contributions.

Who’s exempt from the CalSavers law?

You are exempt if your business offers a 401k or other qualified retirement plan such as a 403b,  a Simple IRA, or a Payroll Deduct IRA with auto-enrollment.

If you have fewer than 5 employees, your business is also exempt.

What’s the Icon Savings Plan?

Icon is the easiest and most affordable way to offer a retirement savings plan.

Icon is a payroll-deduct IRA with auto-enrollment, and is built with modern digital technology.

Icon removes high costs, complexities, and administrative burdens from employers. Likewise, you have no federal filing requirements and no fiduciary responsibilities. There are no matching contributions, and the employee annual contribution limit is $6,000, or $7,000 for employees over 50 years old.

For employees, Icon delivers an easy-to-use plan with a browser-based interface. Savings are invested in a portfolio tailored to the needs of the individual. The Icon auto-advisor monitors and automatically rebalances a diversified portfolio of ETFs (Exchange Traded Funds) from leading asset managers like Vanguard and BlackRock.

You can enroll in about 5 minutes. And to set up your plan takes about 30 minutes. Icon integrates with your payroll and provides a streamlined dashboard for easy plan administration.

Your employees will be automatically enrolled, as required by the state mandate, and they can opt-out at any time.