News + Insights

By state law, employers that have five or more California-based employees (one aged 18+) must begin offering such employees a retirement plan, or offer them the state of California’s CalSavers retirement program. The deadline for all affected employers to comply is June 30, 2022.

CalSavers is technically a Roth IRA with automatic participation. Employee contributions are payroll deducted on an after-tax basis and deposited into a Roth IRA for the employee. The employee contribution is 5% of their paycheck with an annual escalation of 1% to a maximum of 8%. Because the program utilizes a Roth IRA, earnings on employee contributions and distributions are tax exempt.

Employers can establish an alternative plan which better suits their employees needs, such as a 401(k). The 401(k) allows for pre-tax contributions, greater plan design options not found in the CalSavers Roth IRA, such as voluntary employee contributions, employer contributions, greater array of investment options, etc.

If you have not investigated the CalSavers mandate and/or the 401(k) alternative, we suggest you do so soon. We can assist!  Please feel free to contact your BAIS Team Representative to learn how; specifically to investigate CalSavers in greater detail and learn if the 401(k) alternative might better fit your business needs.