California business owners, you’re going to want to pay attention to this important update. Starting January 1, 2025 businesses one or more employees “must participate in CalSavers if they do not already have a workplace retirement plan.”
What is CalSavers?
CalSavers is a retirement savings program for employees whose employers don’t provide a retirement plan. It allows workers to save through automatic payroll deductions into an Individual Retirement Account (IRA).
How It Works
For Employees:
- If your employer doesn’t offer a retirement plan, you’ll be automatically enrolled in CalSavers.
- Contributions come straight out of your paycheck—you don’t have to do anything extra.
- The default savings rate is 5% of your gross pay, but you can adjust this rate or choose not to participate.
For Employers:
- If you have one or more employees and don’t offer a retirement plan, you’re required to facilitate CalSavers.
- This involves enrolling employees and ensuring their contributions are deducted and sent to the program.
- For more details on CalSavers you can visit: https://www.calsavers.com/
Compliance Deadlines
Businesses with five or more employees must register by the end of the year they become subject to the mandate, such as when their staff grows to over five people or if they stop offering a retirement plan.
Business Owners You’re Going to Want to Know About This
SECURE 2.0 introduced a tax credit for small businesses to encourage employer contributions to new 401(k) plans during their initial years. To qualify, businesses must meet the eligibility criteria outlined in the startup tax credit guidelines.
The credit caps at $1,000 annually for each eligible employee earning $100,000 or less per year, adjusted for inflation. The exact credit amount varies based on the number of employees and the plan’s age.
For more information on the Secure 2.0 Act and the benefits for both employees and employers you can head to our blog for more information.
