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<\/div>\n?In 2016, California passed legislation stating that employers who do not sponsor an employee-retirement plan must participate in a state-run retirement program. This program became known as CalSavers.<\/p>\n
While there have been legal challenges to CalSavers, the program persists. CalSavers provides an opportunity for employees to defer wages, through payroll deductions by the employer, to a state-run individual retirement savings account program.<\/p>\n
An employer is not required to participate in CalSavers if it sponsors or participates in a retirement plan, such as a 401(k) or pension plan. To be exempt from CalSavers, an employer may sponsor a retirement plan for any of its employees. California employees need not enroll in the retirement plan for the employer to be exempt.<\/p>\n
Previously, under the statute “eligible employer” was defined as a person or entity engaged in a business, industry, profession, trade, or another enterprise in the state, excluding specified federal, state, and local governmental entities, with five or more employees and that satisfies certain requirements to establish or participate in a payroll deposit retirement savings arrangement.<\/p>\n
On August 26, Gov. Gavin Newsom signed Senate Bill (SB) 1126, which expands the definition of eligible employer to include a person or entity, as described above, that has at least one eligible employee and that satisfies the requirements to establish or participate in a payroll deposit retirement savings arrangement, and would additionally exclude from the definition of “eligible employer” sole proprietorships, self-employed individuals, or other business entities that do not employ any individuals other than the owners of the business.<\/p>\n
Also, the bill requires that eligible employers with five or more employees that do not offer a retirement savings program to have a payroll deposit saving arrangement to allow employee participation in the program within 36 months after the board opens the program for enrollment. <\/p>\n
Moreover, by Dec. 31, 2025, all eligible employers with one or more employees would need to have a payroll deposit savings arrangement, if they do not provide a retirement savings program.<\/p>\n
Donald P. Sullivan is an attorney with Jackson Lewis in San Francisco. <\/em>\u00a9<\/em> 2022. All rights reserved. Reprinted with permission. <\/em><\/p>\n