 CalSavers: What You Need to Know Before Enrolling
Big changes are coming for businesses in California that don't offer their employees a retirement savings plan. Beginning in 2020, the state's CalSavers program will begin a phased roll out, starting with businesses with 100 or more employees. By 2022, every business with five or more employees in the State of California will be required to offer a retirement savings plan or face financial penalties.
If a business does not have a private retirement plan in place by the deadline, it will be required to offer employees a state-administered IRA plan called CalSavers. With CalSavers, employees are auto-enrolled in an IRA at a contribution rate of 5% of gross pay, unless they choose to adjust the contribution rate or opt-out.
"Nearly 80% of small business employees do not have access to a retirement savings option at work. That's mainly because small business owners are wary of the costs, administrative complexity and liability," Mark Herbert, California Director of Small Business Majority says.
CalSavers provides easy access to basic retirement savings tools. However, as with any business decision, it is important to consider all the options before jumping into something just because it seems like the easiest way.
Another option that qualifies to fulfill this requirement is an employer-sponsored
401(k) or
403(b) program. These plans offer more benefits to business owners and employees alike. A few of the benefits include:
- Tax deductible contributions
- Higher contribution limits
- No income limits
- Employer match available (tax deductible for business owner)
It is a common myth that all 401(k) and 403(b) plans are expensive, time-consuming and best suited for large businesses with plenty of resources. Technology has made it easier and
more affordable for small and medium sized businesses to take advantage of these plans and their benefits. By
automating administration and integrating with
popular payroll providers, there is no need for additional staff or resources to launch and administer a 401(k) in the modern era.
Automated 401k providers can offer access to thousands of desirable investment funds and perks like financial advice from an SEC-registered advisor, without the high cost of traditional providers.
And, finally, don't forget to consider the
type of plan employees will value most. In a competitive employment market, a solid 401(k) or 4013(b) plan could distinguish your business from the competition with employees and prospects.
Enrolling in CalSavers is not mandatory but offering a qualified retirement savings plan soon will be. Now is the time to find the best option for your growing business.
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