Not offering employees a retirement plan? For workers in California, the state has them covered.
The California State Treasurer’s office announced the launch of CalSavers Retirement Savings Program, a state-run IRA, this week. Over 7.5 million California employees without employer-sponsored retirement plans can access the program, making it the largest state-run retirement benefit in the nation.
“With California’s size and diversity, this pioneering program represents a major milestone — for California and the entire nation,” California State Treasurer Fiona Ma said in a statement. “Creating CalSavers solidifies our position as a leader in growing the national movement to help all Americans retire with dignity.”
In coming years, employers with at least five California workers will be required by law to provide retirement savings benefits to their workforce, which can be done through CalSavers or the private market. CalSavers administrators and lawmakers say the program was created to provide employers with a simple solution to comply with the benefit requirement, in addition to ensuring workers have access to retirement benefits.
“CalSavers addresses all three of these challenges head-on: it’s easy to facilitate, employers have no fiduciary liability, and there are no fees for employers. Employers are only responsible for providing us with their employee roster and then remitting employee payroll contributions each pay period,” said Katie Selenski, CalSavers executive director.
Selenski said the state aimed to take on all the communication and interaction with employees about their accounts to make the employer experience “as seamless and simple as possible.”
CalSavers works like employer-sponsored retirement benefits; once enrolled, the employee’s chosen contribution is automatically deducted from their paycheck. Participants are charged depending on the plan selected, which ends up being around 83-95 cents per year for every $100 invested. Unlike employer-sponsored retirement accounts, CalSavers contributions stay put when employees change jobs. The benefit is also available to self-employed and gig workers in September.
“We’re thrilled with the results we’ve seen through the pilot and believe that small steps can lead to giant leaps forward for savers,” Selenski said. “We’re leveling the playing field for workers who haven’t had access to two of the most powerful savings tools — automatic enrollment and saving via payroll deduction — and proving that workers at even low income levels will save when they have access to these easy tools.”
