In 2016, California passed Senate Bill 1234 effective July of 2019. After failed opposition and name changes, the program is called CalSavers. It's a mandatory retirement plan offering, designed to offer virtually everybody a chance to save for retirement directly from their paycheck. Offering the program is required for companies that employ 5 or more people (including part-time employees). Businesses are subject to steep penalties for non-compliance.

There is no opting out for businesses, unless they offer their own retirement plan (i.e. 401(k), Simple IRA, SEP IRA, etc.). Below are some quick facts about the coming program:

What’s the cost of non-compliance? $250 per employee.

Who is required to participate? Business owners with 5 or more employees, who don’t have an existing retirement plan.

When does this go into effect? It will be available in July 2019, and mandatory for companies with more than 100 employees in June 2020, with smaller company participation deadlines in 2021 and 2022.

Who ensures businesses will comply? Business owners are on their own to establish the plans and ensure compliance.

How does it work? Employers will be responsible for automatically enrolling all employees, withholding 5% of their pay, and contributing to their CalSavers account. Employees will be able to save up to the current IRA contribution limit (for 2019, it is $6,000 per person under the age of 50).

Who pays for it? Employees, through investment fees. Fees are estimated to be between 0.80% and 1% initially.

How do you get out of it? Set up a 401(k), SEP IRA, Simple IRA or another retirement plan type if you don't want to start with the state's program.

Here at Sweeney & Michel Financial Planning, we can help you do that. Call us at 530-487-1777 or book an appointment right here on our site and we can review the alternative options that fit best for you.

If you want to read more about CalSavers, go to https://www.treasurer.ca.gov/scib/