California Launches State Retirement Plan Affecting up to 7.5 Million Workers
California has created a state retirement plan that requires employers to provide retirement savings for their workers. Employers with at least five employees can choose to join the state plan or utilize a private retirement program.
The roll out is beginning this month. Businesses with over 100 employees must abide by the new laws by June 30, 2020. Businesses with 5+ employees but less than 100 employees have a deadline of June 30, 2022.
The program, known as CalSavers, ensures that as many as 7.5 million working Californians have access to adequate retirement savings. California is one of several states to implement a state-run retirement plan. In total, these programs could impact 55 million Americans.
Businesses that choose to participate in CalSavers will have 30 days to notify the state once a new employee is hired. The employee will be sent information about the program and given 30 days to opt out of it. The default contribution for CalSavers is 5%, but employees can adjust that.
There are currently 2,700 active CalSavers accounts, with an average contribution of 4.93%. This equates to an average savings of $91 per month.
Employers do not pay any fees to use CalSavers, and there is no fiduciary liability. The first $1,000 each participant contributes will go into a money market fund. Subsequent contributions will go into a target date fund, which grows assets over a select timeframe. Those dates are based on the age of the employee.