One of the first things that you learn when you start or run a business in California—you have a not-so-silent partner who, every year, does something that will mess with your head—the state government.
This “something” is the launch of a new, state-mandated employee retirement program called CalSavers. It was the brainchild of former legislative leader Kevin de León, who introduced his first piece of legislation on the topic during the financial chaos of 2008 as an Assemblyman. As a State Senator de León passed two bills that set the program framework, starting with staff and a nine-member “investment board.” They came up with a plan establishing a Roth IRA, with funds into the hands of a professional management team that would do the actual investing.
The ostensible reason is that seven million California workers have no real savings or retirement plan other than Social Security and Medicare—not nearly enough to live in high-cost California. CalSavers is supposed to help fill in the gap.
Rarely discussed is the underlying reason that the state is filling the gap with welfare programs, food stamps and housing benefits. As the nine million-strong California Baby Boom generation started entering retirement, it scared the Sacramento establishment; they are worried it could break the state resources bank.
So, the state is making the solution to this problem your problem, as in the immortal words of Governor Gavin Newsom, “Whether You Like It or Not.”
CalSavers says there is no cost to the employer for the program unless you don’t count the $900 per worker fine for failing to register or the time cost of actually doing the work of complying with the new law.
The employer mandate looks simple, especially for our union employers and most others who already offer an approved 401K or Roth plan. If you don’t, it’s time to start talking with your financial advisers/lawyers/CPAs/ for help in getting through the big change in your business model.
There is time for answers. You don’t have to register your business in the program at //www.calsavers.com immediately. There is a three-year phased rollout, complete with staggered deadlines for registration based on employer size:
- More than 100 employees on June 30, 2020
- More than 50 employees, June 30, 2021
- Five or more employees, June 30, 2022
Unlike Obamacare which also carried an employer mandate, the CalSavers program doesn’t appear to have big-time political opposition, so this mind-bender may be here to stay.
By Brendan Slagle, ECA President Email: [email protected]