California has launched a state retirement savings program for residents who aren’t offered a retirement plan at work, joining a handful of other states who have already done the same or plan to in the not-so-distant future.
Starting today, employers in the most popular state in the union with five or more workers who don’t offer a retirement plan can sign up for the CalSavers Retirement Savings Program, enabling employees to enroll.
Their employees will be automatically enrolled at a 5% contribution rate but they can raise the rate up to a maximum of $6,000 per year for those under 50 and up $7,000 for those 50 and older – the same maximums set by the federal government for IRA accounts — or choose to opt out. The accounts will remain with the employees even if they change jobs and those work freelance or on a contract basis in the so-called gig economy can sign up beginning Sept. 1.
The state is encouraging employers who don’t offer a retirement plan to register for the program but they are not required to sign up for at least another year, according to the following schedule:
- more than 100 employees: June 30, 2020
- more than 50 employees: June 30, 2021
- five or more employees: June 30, 2022
Employers pay no fees to sign up and have no fiduciary liability but they are responsible for providing their employee roster to CalSavers and for remitting payroll contributions each period, according to CalSavers Executive Director Katie Selenski.
The state program will take care of all communications and interactions with employees about their accounts. “We’ve designed this groundbreaking program to make the employer experience as seamless and simple as possible,” said Selenski.
“With California’s size and diversity, this pioneering program represents a major milestone — for California and the entire nation,” said State Treasurer Fiona Ma in a a statement.