CalSavers Deadlines for Small Businesses: What You Need to Know

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California’s deadline for small businesses to either participate in the CalSavers Retirement Savings Program or offer their own retirement plans for their employees is upon us. The three-year phased-in implementation of the CalSavers program started in 2020 and is culminating with a deadline that will affect many small businesses as of June 30, 2022. A nonprofit and church attorney at Church Law Center regularly advises nonprofit organizations, churches, and religious organizations about these and other laws that affect their everyday operations.

CalSavers June 30, 2022, Deadline

Eligible employers with five or more employees, at least one of whom is age 18, must begin to offer a qualified retirement plan for their employees or register to facilitate CalSavers as of June 30, 2022.

Eligible Employers

Your eligibility is based on your average number of employees throughout the previous calendar year. The state calculates this number by averaging the number of employees you report to the Employment Development Department on your previous four DE9C filings for the prior year.

Qualified Retirement Plans

Qualified retirement plans for the purposes of determining whether an employer must register to facilitate CalSavers include the following types of retirement plans:

  • 401(a) – Qualified plans (including profit-sharing plans and defined benefit plans)
  • 401(k) plans – (including multiple or pooled employer plans)
  • 403(a) – Qualified Annuity Plan or 403(b) Tax-Sheltered Annuity Plan
  • 408(k) Simplified Employee Pension (SEP) plans
  • 408(p) – Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA Plan
  • Payroll deduction IRAs with automatic enrollment

Eligible Employees

All employees of an eligible employer can participate in CalSavers, so long as they are at least 18 years of age and have the status of an employee. Participation in the program is not based on the number of hours worked or how long they have been employed with the employer. Employees can participate from the first day they become employed with an eligible employer; employers must upload new employees to the portal within 30 days of their hire.

Churches are Exempt from CalSavers

The CalSavers Retirement Savings Trust Act does not expressly state that religious organizations are exempt from CalSavers. However, the regulations covering CalSavers invoke the definition of “employment” from the California Unemployment Insurance Act. While there are some ambiguities in the extent to which this applies, CalSavers takes the position that religious organizations are exempt from the CalSavers mandate. As evidence of this, the website for CalSavers states in the FAQ section that religious organizations are exempt from the program, and the agency has generally not issued its communications to religious corporations. The CalSavers office has confirmed to us that it considers religious organizations to be exempt from the CalSavers mandate.

Penalties for Noncompliance

Under Ca. Gov. Code § 100033(b), an eligible employer that fails to allow its employees to participate in CalSavers without good cause on or before 90 days after service of notice of its failure to comply shall be subject to a penalty. The applicable penalty is $250 per employee if the noncompliance extends 90 days or more after the notice of noncompliance. However, the employer will face an additional penalty of $500 per employee if the noncompliance extends 180 days or more after the notice of noncompliance.

How CalSavers Works

Employees who do not opt out are auto-enrolled in CalSavers after 30 days. Their employers will automatically deduct a default amount of five percent of their gross pay and place it into a Roth IRA in their names. Employees can recharacterize their account as a traditional IRA and change their deduction rate at any time. They also can opt out and opt back into CalSavers at any time.

What Employers Need to Do

The employer’s role in facilitating CalSavers is limited. Employers are responsible for uploading employee information to CalSavers. They then submit participating employee contributions to CalSavers via simple payroll deduction. Employers pay no fees or contributions for their facilitation of the program. They also have no fiduciary responsibilities for the program.

Contact Us Today for Legal Assistance

Church Law Center gears its practice to legal matters that affect nonprofit organizations, churches, and other religious organizations, including California nonprofit political activity. This focus allows us to concentrate our efforts on keeping abreast of the ever-changing laws and policies as they develop over time. We are here to represent your interests throughout every stage of your legal matter. Call us today at (949) 245-3177 or visit us online and see what we can do for you.

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