California’s Mandatory Payroll Deduction IRA Program

The State of California has instituted a mandatory payroll deduction IRA program known as CalSavers which will be effective in 2020.

What you need to know…

CalSavers will contact employers several months before program participation becomes mandatory. At that time, employers that already offer a retirement plan can certify that they are exempt from the program.

To be exempt from the state-run plan, an employer must sponsor one of the following types of retirement plans:

  • Employer Sponsored Payroll Deduction IRA Plan
  • 401(k), Profit Sharing or Pension Plan qualified under section 401(a) of the Internal Revenue Code
  • Qualified Annuity Plan under section 403(a)
  • Tax Sheltered 403(b) plan under section 403(b)
  • Simplified Employee Pension (SEP) Plan under section 408(k)
  • Simple IRA plan under section 408(p)
  • Deferred compensation plan under section 457(b)

There currently isn’t a mechanism for employers who sponsor a retirement plan to proactively advise CalSavers that they should be exempt.

CalSavers is in a pilot phase with a select group of employers before it becomes a state-wide requirement. This phase concludes on June 30, 2020, at which time employers without existing plans must take part according to the following timeline:

  • June 30, 2020 – Employers with more than 100 employees
  • June 30, 2021 – Employers with more than 50 employees
  • June 30, 2022 – Employers with more than 5 employees
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