CalSavers: What CA Small Business Owners Need to Know

Are you a California business owner with five or more employees? If so, you’re gonna want to mark June 30th, 2022 on your calendar! Why? It’s the deadline to have a retirement plan in place for your employees. If you don’t comply with the state requirements by June 30th, 2022, you’re putting yourself at risk of paying a hefty fine per employee that works for you.

But, don’t worry just yet. Most small business owners worry that offering retirement plan options for their workers is costly and will ultimately result in massive losses. That simply isn’t the case. Not only does offering retirement plans help attract and retain top talent (which helps you in the long run), but it actually can be extremely affordable.

Not to mention, the CalSavers program has been put in place to help ensure business owners have access to their fair share of options to choose from. Here’s what to know about CalSavers along with other options you have as a CA small business owner.

Not interested in a state-run option like CalSavers? Check out our managed IRA plans, which start out at just $49/month plus $7/employee.

What is the CalSavers Program?

The CalSavers Retirement Program is a new state-based retirement plan for small businesses in California and their employees. This plan will allow employers to offer automatic enrollment and payroll deduction to employees with no administrative costs or hidden fees. 

How does it work? It’s actually quite easy for small business owners, and there are no employer fees. Unlike a regular 401(k) that most businesses opt for, employers do not make contributions to employee accounts with the retirement accounts that are set up with the CalSavers program. In fact, the accounts aren’t even 401(k)s at all; they’re personal IRA retirement accounts overseen by the CalSavers Retirement Savings Investment Board.

Not interested in a state-run option like CalSavers? Check out our managed IRA plans, which start out at just $49/month plus $7/employee.

Are CalSavers Retirement Accounts Good?

As mentioned above, the personal IRA retirement accounts are overseen by the CalSavers Retirement Savings Investment Board. But, just who is on the CalSavers Retirement Savings Investment Board? 

Mostly government employees, really. The California State Treasurer, the State Controller, and a few other independent contractors with experience in wealth management. You can check out their backgrounds here.

While they do have experience in finance, there isn’t currently one person on the board with expert experience in managing large portfolios in a way that can help them grow exponentially over time. Furthermore, it’s impossible for the eight people in the board to personally manage every single CalSavers retirement account across the state.

So, are the retirement accounts good? IRAs are great, sure, but what you’re really looking for is a managed IRA plan that is being personally managed by an expert investment professional. The Wealth Stack IRA Pack offers just that, along with:

  • High-quality investment education for your employees
  • Investment recommendations from a seasoned Wall Street professional
  • FREE financial assessment and review of your business

How Does CalSavers Benefit Employees?

All employees deserve access to quality retirement account options. And, before CalSavers was implemented, that just wasn’t the reality that most employees in California were facing. In fact, a study showed that half of California private sector employees had no retirement assets. On top of that, the study from Berkely also noted that three-quarters of low-income workers and half of middle-income workers had no dedicated retirement assets. 

Those numbers were even more worrisome for minorities. According to the study, 7 out of 10 Latinos had no access to a workplace retirement plan. So, first and foremost, mandates that require employers to offer retirement solutions are beneficial in that it ensures that all workers will have the access they deserve to these types of financial products.

However, we do understand that that’s just not feasible for some small business owners. If you have six employees, for example, and you’re struggling to make ends meet, it might seem even more of an expense to pay to set up payroll accounting and retirement accounts (not to mention a lot more hassle and headaches). 

That’s basically the idea behind CalSavers. Business owners simply have to enroll in the program and provide the state with some basic information. Then, you follow these two steps, according to the CalSavers website:

  1. Submit information for each eligible employee. This will begin the automatic enrollment process. Employees will then have 30 days to decide to participate or opt out. If they do not make a selection, they will be auto-enrolled in the program.
  2. Facilitate payroll deductions each payroll period through bank transfer. These deductions will be added to the employee’s account and invested according to their selections.

What do they mean by “selections?” When a new employee is enrolled in the program, a standard deduction of 5% from gross pay is automatically deducted from their payroll. Then, each year, that deduction increases by 1% until it reaches a cap of 8%. However, each employee is allowed to make their own decision on how much they want to contribute. They can also choose to opt out of the auto escalation feature and continue to contribute at a flat rate of 5%.

Not interested in a state-run option like CalSavers? Check out our managed IRA plans, which start out at just $49/month plus $8/employee.

What Are the Benefits of Participating in CalSavers?

As a business owner, what are the benefits of participating in CalSavers? Well, the biggest benefit is that you’ll ensure you’re compliant with state rules and regulations! This means you won’t get penalized for not offering retirement options to your employees.

However, the other big benefit of CalSavers is that it comes at no cost to business owners. There are no program fees or management costs involved. You simply have to sign up for the program.

As a business owner, offering these types of retirement options can help you attract and retain top talent. Workers are interested in these types of perks now more than ever. 40% of employees working for small businesses say that they would leave their current company for another that offers a 401(k) plan. On top of that, a survey by Willis Tower Watson showed that 75% of new hires at a company offering a 401(k) say that a retirement plan provides a compelling reason to stay.

Are There Other Retirement Options for Small Business Owners

CalSavers isn’t the only retirement option available to small business owners. If you want to offer your employees great retirement solutions while also ensuring that the accounts they’re investing in are going to actually grow long-term and help them build wealth, try the Wealth Stack Retirement Pack.

Wealth Stack has plenty of tools at your disposal, including providing access to financial counselors who will walk alongside you and your workers as they educate themselves about all aspects necessary when investing in their retirement portfolios. And, Wealth Stack retirement accounts are managed by an expert investor and former hedge fund manager.

With a library of over 100 videos and articles on everything from investing to retirement planning and personal finance tips, we’re your one-stop-shop for all financial-related questions. You literally won’t find this anywhere else.

Click here to learn more about the Wealth Stack Retirement Pack and to schedule your free consultation with a professional today.