Employers with 5+ employees have until 2022
California state law requires all employers with 50 or more employees to have a retirement plan in place for all employees by June 30, 2021. Employers with 100+ employees should already be in compliance with this law (as your deadline was June 2020 to have a plan in place).
In addition to being required in California (with similar laws in Oregon and Illinois), retirement plans are a great way to attract and retain your talent, educate your team about their retirement needs and help your employees plan and save for the future.
To comply with this new requirement, employers with 50 or more employees must establish a plan by June 30, 2021 or register by that date to take part in California’s government-run retirement savings program, CalSavers. If an employer chooses to have its own program, you must still opt out of CalSavers (see the CalSavers website for more information).
CalSavers offers basic retirement saving services. While there is no fee to join, an employer will incur labor costs in terms of the administrative tasks associated with the plan. Employees may contribute a maximum of $6000 annually or $7000 annually for those who qualify for the catch-up contribution.
Another option is for employers to establish their own 401(k) plan. The advantage to doing this versus using CalSavers includes the ability to customize the plan to fit the needs of your workforce and add multiple options not offered through CalSavers. Also, your employees may contribute much more to a company 40l(k) plan – up to $26,000 per year. It can take up to one month to set up an employee plan, so we suggest you begin now to make sure you are in compliance with the June 30 deadline.
PBO Advisory Group recently hosted a webinar, featuring our friends at Cornerstone Wealth Advisors. The Cornerstone team did an excellent job of comparing the CalSavers and employer-based 401(k) options. We encourage you to listen to the webinar and/or contact us.
The PBO Advisory Group team will walk you through the options and benefits and help you make the best choice for you and your employees.
For more information, please contact Francesca San Diego.