Mandatory Retirement Benefits: What It Means

No Retirement Savings? California Wants To Help With Its Mandatory Retirement Plan

Updated October 7, 2020

A substantial amount of American households have no retirement savings.

No Retirement Savings

According to the National Institute on Retirement Security, “The data also indicate that 57 percent (more than 100 million) of working age individuals do not own any retirement account assets in an employer-sponsored 401(k)-type plan, individual account or pension.”

Governor Jerry Brown signed a bill in 2016 designed to address this issue. As a result, employers in California will soon be required to offer retirement benefits to their employees.

This will likely affect about 5-7 million Californians who work for an employer without a pension or 401(k) account.

The letters began going out to employers October 1st (see the sample below).

CalSavers Mandatory Retirement Benefits


It’s called SB-1234 (easy to remember) and you can read the full text of the Bill here.

The program is now called CalSavers (formerly called Secure Choice) and it will be a state-managed Individual Retirement Account (IRA).

The savings program would have professional managed investments with oversight from a public board of directors.


Employers with 5 or more employees who do not offer a retirement plan will be obligated to participate. Employers can register for CalSavers and must comply by the following deadlines:

Size of BusinessRegistration Deadline
100+ EmployeesSeptember 30, 2020
50+ EmployeesJune 30, 2021
5+ EmployeesJune 30, 2022

The implementation will be phased in over a period of years. The first phase begins this year for larger employers – and small businesses will have a mandate beginning in 2022 (subject to change).

The good news for employers, they will not have to administer the program, nor contribute.

They will not have any liability for an employee’s decision to participate.

A payroll company (such as Pacific Payroll Group) should set up the employee contribution to not only be listed on the pay stubs and any employer reports, but be equipped to submit the contribution(s) electronically to CalSavers.

A payroll company should do this for a nominal fee and not charge an exorbitant amount, just because this is now a State requirement. Because there is data handling, a small fee should be accepted, but a reputable/knowledgeable payroll company should be able to handle these additional transactions easily with minimal effort.

The employers will be expected to inform their employees of the program and hand out informational materials (provided by the state).

Since the roll-out is an evolving process, employers are encouraged to check with their HR or payroll department, as well as this CalSavers website, for the most recent requirements and regulations.

If you already offer an employer-sponsored retirement plan, you are exempt from this requirement.


Exciting news! If you’re skimming ahead, CalSavers is going to offer a low cost, portable retirement savings plan through your workplace.

If your employer has at least five employees, and doesn’t offer a retirement plan, you will be eligible to enroll in the program.

It isn’t yet determined if part-time workers will be able to participate. As of this writing, they do expect that self-employed workers will be able to opt into the program.

The program is voluntary. Employees will have the option to enroll once a year during open enrollment – and they will also have the option to opt-out.

If workers elect to participate in the program, it is estimated that they would automatically have between 2% and 5% of their pay deposited into their CalSavers account.

The cost to employees comes out to about $0.83 – $0.95 per year for every $100 in the employee’s account (depending on the investment selection). This covers the costs of administering the program and fund expenses. The fee is automatically taken out of the account balance.

The implementation date will depend on the number of employees, as per the graphic above.


There is a pending lawsuit by the nonprofit, anti-tax group, HJTA, arguing that the retirement savings program is illegal under federal pension law.

The suit also seeks an injunction to stop public funding of the program.

HJTA points out that there is nothing stopping workers from opening their own retirement accounts now, without the state’s help.

In response, California Treasurer John Chiang says the lawsuit is shortsighted and he’s confident that Calsavers is on strong legal ground, and is proceeding as planned.

July 2020 CalSavers Retirement Update

Check out the latest from National Law Review:

“California employers with more than 100 employees are required to register (or certify as exempt) with the CalSavers Retirement Savings Program (CalSavers) by September 30, 2020 (the original deadline of June 30, 2020 was extended due to the COVID-19 pandemic).”


Plaintiffs still plan to amend their case or file an appeal. In the meantime, CalSavers is moving ahead as planned and California Employers will still need to meet their applicable enrollment deadlines.

Employers can keep an eye on this space (or link to this page) so they stay updated on the latest requirements and deadlines. We’re all here to help.

About the Blogger

Steve Downey

Benefits Specialist

Lic #: 0482309Insurance Benefits Consultant

Steve Downey, owner of JS Downey Insurance Service, offers over 40 years as a licensed insurance agent in San Diego.

With his knowledge and expertise in health insurance, he is a viable source for any company’s health insurance needs. Having built his reputation on dependability and an extraordinary understanding of today’s shift in health insurance, he is a valuable resource for your company and your employees. He staffs only those that mirror his knowledge and expertise.

Steve is also a speaker and advocate of broker/client relations and is regarded as an expert in health care related topics across California and abroad. In his free time, he likes to walk his Golden Retriever, Murphy, play racquetball, ride his motorcycle along the coast, and spend family time with his wife, kids and grandchildren.

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