CalSavers enforcement, enrollment deadlines fast approaching

For some California small businesses that have been procrastinating on getting signed up for the CalSavers Retirement Savings Program, the bill is about to become due.

CalSavers Executive Director Katie Selenski says small businesses not yet in compliance with a state deadline to sponsor retirement plans for their workers will start receiving enforcement notices by the end of this month.

The CalSavers program is an effort to confront projections from the State Treasurer’s office that show a startling number of Californians are financially unprepared for retirement. Under the CalSavers Trust Retirement Savings Act of 2016, that plan can come either via a traditional private sector retirement package (pension, 401k or IRA) or through an IRA through CalSavers.

Employees are automatically enrolled in the system as soon as their employer signs up, though they can also opt-out if they so choose. Those who stay in will have 5 percent of their gross pay placed into one of the five available CalSaver IRA options. This automatic contribution rate increases by 1 percent each year until capping at 8 percent, though workers can also choose to contribute less. They can also opt to contribute more, up to the federal IRA contribution limit.

Employers are deemed non-compliant if they fail to register, upload employee rosters, or make employee payroll deductions and remittance contributions. Those who don’t comply face initial fines of $250 per employee. Continued noncompliance could see the employer receive additional fines of $500 per employee.

Selenski says that overall only about 12 percent of the required businesses – those that are not otherwise exempt – are not in compliance. Her top priority now is getting the balance of those employers who do fall under the mandate into the fold.

“Right now, we’re laser-focused on getting these mandated employers fully on-boarded,” she says. “We’re here to provide California workers a path to retirement security, regardless of their employer.”

The law has been phased in over the last three years, based on a business’s number of workers. The first wave deadline was Sept. 30, 2020 and applied to companies with more than 100 employees. The second wave came in June 2021 and included employers with 51 to 100 employees. Companies with five or more employees had deadlines that were split into two different categories.

The third wave deadline for five to 50 employees was June 30, 2022, and newly eligible companies, such as newly established businesses or those that recently employed five or more employees, was December 31, 2022.

Business with between one and four employees became eligible to sign up in January, and all must be registered by December 31 2025.

“The third wave of employers was so large,” Selenski says. “Within the total distribution of mandated employers, 92 percent were in the five and up category that had the 2022 deadline.”

Approximately 75,000 employers of the two categories were non-compliant. Among them, about 84 percent were in the third wave category, and the other 15 percent were newly eligible companies, she says.

“It’s an important first step,” says Nari Rhee, Director of the Retirement Security Program at the UC Berkeley Labor Center, who regularly presents her research before state and federal committees seeking to strengthen the US retirement system and make it more inclusive.

Black and Latino workers, who are often in jobs that are lower wage, on a part-time basis, or with higher job turnover rates, have often been left out of the retirement system.

But enforcement and ensuring workers are aware of their eligibility to participate can be challenging, says Rhee.

“There are some bottlenecks,” she says, including getting employers first to register and upload their payroll roster to a census for auto-enrollment setup.

“I think in some cases, they just might not know about it or understand it, especially with the really small businesses,” says Rhee. “I think that’s going to require a lot of active outreach.”

Rhee says there are also still some “big gaps” in overall retirement coverage and income disparities to tackle at both the state and federal levels.

She adds that public retirement programs are more robust than private sector retirement programs and that this type of program would be especially helpful for communities of color to “keep out of poverty in old age.”

She notes Black and Latino workers, who are often in jobs that are lower wage, on a part-time basis, or with higher job turnover rates, have often been left out of the retirement system. For retirement programs like CalSavers to all work, Rhee says employer participation is key.

Industries with existing cultural or systemic barriers might be slower on the uptake than others, says Bianca Blomquist, California Policy Director & Northern California Outreach Director of Small Business Majority, a statewide organization that, among its other efforts, researches small businesses’ needs and challenges.

While CalSavers registers any individuals with an IRS-provided Individual Taxpayer Identification Number – including undocumented immigrants – some may still be missing out on retirement benefits.

“CalSavers was designed so that folks who don’t have a social security number would be eligible to participate,” says Blomquist.

But she says that can be a hard group to convince, noting that workers with tenuous immigration status might be less willing to participate because of “distrust with their employer or even among these groups” with programs that “the state has a hand in.”

That hesitation has prompted a large outreach effort to help better inform those who would most benefit from the plan.

According to Carolina Martinez, CEO of Cameo, a support network for microbusinesses nationwide, which has a history of serving underserved communities.

“Those are the ones that our network is looking to reach out to be able to provide resources,” she says.  “Our members have been putting on a lot of events in person and online to really talk about this, and it’s been a lot of concerted effort to really make sure that the word spreads out.”

“In the absence of action, we’re heading for a major train wreck when it comes to older adults and retirement security based on the path we’re on right now.”

One of the bigger challenges has been finding culturally and language appropriate resources to help ensure that eligible workers fully understand what the CalSaver program is and how a retirement option would benefit them at the end of their careers.

She adds that it’s important for organizations serving underserved communities to participate in strong targeted outreach to hear about the program.

“The big challenge is always making sure that the average is the right one, that the communications are clear, and that there is an engaging component, says Martinez.

Senator Dave Cortese, who authored the measure last year (SB 1126 2022) to expand CalSavers eligibility to companies with as few as a single employee, says that based on current projections of the state’s older population doubling, he sees a lot of people at risk of having inadequate support and income 10 years from now.

“Clearly, a piece of that would be what we now call retirement security,” says Cortese, who chairs the Senate Labor, Public Employment and Retirement Committee.  “Social Security hasn’t been keeping up with the cost of living, and I don’t see local governments or state government recalibrating its budget or its policies related to the budget.”

According to Cortese, there are two parts to take action: to increase investment for older adults and another to invest with an equity lens if we want to have a “California for all.”

“In the absence of action, we’re heading for a major train wreck when it comes to older adults and retirement security based on the path we’re on right now,” he says.

Sarah Chung is an intern with Capitol Weekly. She is a graduate of the Columbia School of Journalism.