CalSavers is California’s new retirement law which seeks to ensure that workers who do not already have a retirement plan can save for the future. As noble as it sounds, it could mean serious repercussions for your business.
While we always recommend you consult with an expert to ensure full compliance with any business laws, we’re going to discuss some of the more significant factors of CalSavers.
The first and most important factor is the deadline for compliance. There is a phased rollout as follows: For business with more than 100 employees, the deadline is Sept. 30, 2020. For business with more than 50 employees, the deadline is June 30, 2021. If you have five or more employees, you will need to have your business both registered with CalSavers by June 30, 2022 (assuming you don’t have a retirement plan already). The penalty for this could be a fine of up to $500 for every employee who is without a plan at that time.
Second, CalSavers will come with substantial administrative costs, make no mistake. You, the employer, will be solely responsible for processing payroll contributions, updating contribution rates, and adding newly eligible employees to the CalSavers plan. Ensuring compliance will cost both time and money in uncertain but sure to be substantial amounts. As a business leader, it’s tough dealing with all the other regulations and complexity that comes with them, and CalSavers will not make things simpler.
Government policies rarely produce tailor-made retirement plans that solve all of your business needs. They’re going to be one-size-fits-all, or more accurately, one-size-fits-some.
However, since CalSavers applies to employees who don’t have retirement plans, the best way to avoid CalSavers is to choose a plan of your own. That way, you both prevent the penalties for having no plan while ensuring that you have full control over the plan you choose to establish.
You may think the logical starting point is to call you payroll company to begin discussing plan options. Having helped many business owners implement retirement plans, I do not recommend this route. Payroll providers often will add on a retirement plan option but often times, they are not truly proficient in helping you administer the plan.
The recommend option to work with an adviser who has deep experience and a passion for working with driven business leaders.
A great place to start is looking for an adviser that is a “thought leader.” This is someone who writes, speaks and publishes on the topic of retirement plans. You want to avoid working with pretenders, that is well meaning advisers who lack the technical expertise to help you implement a plan based on your requirements.
Another way to find an adviser is to ask your CPA or other trusted advisers who they recommend you work with. Excellence generally attracts excellence, so if you have great team of advisers, you can be reasonably sure they know other great professionals who can help you.
Most employers care deeply about their employees and want to make sure they’re taken care of. The best way to do that is on your own terms. Don’t let some government program shrink your profits, waste your time and short-change your employees.
Here is the TL;DR version:
CalSavers requires businesses to register and implement a retirement plan by the deadline of June 2022 for businesses of 5 employees or more (sooner if you have more employees) with penalties for non-compliance
The best way to avoid the penalties, administrative costs and general headache is to find and implement your own retirement plan
The best way to implement your own retirement plan is to meet with an expert adviser who can do a FULL analysis on your situation and give an informed recommendation.
You can find retirement planning experts by seeking out thought leaders, consulting advisers you already know for a referral, or by reaching out to The LifeStone Companies.
Tim McNeely is the CEO of The LifeStone Companies and consults with driven business leaders and select professionals. You can connect with him on LinkedIn or visit him at www.timmcneely.com.