Article provided by: The 401k Plan Company
Whether you're an employer of labor or an employee in California, you must have heard about the Calsavers at some point. But you may want to ask: what is Calsavers, and is it a good option for you? According to the Californian Treasury's website, Calsavers is a foremost retirement savings program designed for the millions of Californians who don't have the means of saving for retirement at their job. It formally opened for registration in July 2019.
What is the Purpose?
Unlike the government sector, many private employers don't have a retirement plan for their workers. This often puts both parties at significant risk: the employer can be liable to litigation. For instance, in the case of Harzewski v. Guidant Corporation, the Federal Court of Appeal established that former employees, whether dismissed or retired, can sue their former employers for additional payments even if they already exhausted all the benefits under the severance settlement or pension plan.
On the other hand, most employees suffer from the constant anxiety of life after retirement, becoming a working man/woman all over again, especially in an expensive state like California; and saving on your own may be very tedious. According to reports, 33.33% of Californians have no operational savings and are at the risk of financial ruin.
Questions like how do you pay for your kid's college tuition, how do you achieve your perfect vacation dream, or live a comfortable life post-retirement, among others, often roam in mind. This can, in turn, cripple your productivity at work; and may even lead to dismissal. Thus, the program was approved through the state law in 2016 to effectively address this issue without the existing encumbrances of bureaucracy, administration costs, etc.
While many critics have argued that it disproportionately benefits the employers more, by removing many liabilities either for their employees' participation or non-participation in the program, it remains an ideal plan for employees that want to enjoy life after retirement. Do you want to take control of your future? These are what you need to know.
Who is Calsavers for?
It's important to stress that Calsavers for Californians is not unique to San Diego or California at large alone. States like Illinois, Washington—Seattle, Maryland, and Connecticut run similar programs, with almost the same requirements as California. Some of the requirements are listed as follows.
The law establishing the program mandates all Californian employers to enroll in CalSavers if they have no existing retirement plan; and actively employs at least 5 Californian employees, working either on a full or part-time basis. Also, at least one employee has to be eligible for CalSavers. It doesn't really matter even if your organization is a not-for-profit, but certain employers are exempt.
Who is Exempt?
The law states that if you already have a retirement plan for your employees in place, you're exempt from this program. But these preexisting retirement plans must conform to the 401(k) plans.
Some of the benefits that employees enjoy under the 401(K) plan include augmented contribution by the employer; that is, the employer matches the pension fund and the monies deducted from the employee's earnings based on agreement.
Other benefits include tax breaks and shelters from creditors. Employers who participate in a union multiemployer pension plans are also exempt from CalSavers. As an employee, you may still need to find out if you need to enroll for Calsavers.
The penalty for noncompliance is the payment of $250 per employee if the so-called employer fails to comply within 90 days of notice. While employees are not mandated to enroll, it's essential to secure your future. Contact the 401k Company to take control of your future: 858-220-1505