New Mandatory Retirement Plans for Businesses with 5+ Employees

Starting in June, any California employer with 5 or more W-2 employees will be required to offer a qualified retirement plan to their employees. California introduced its own affordable retirement plan called CalSavers last year which is a Roth Individual Retirement Account or Roth IRA. While CalSavers is an option for small businesses, they can instead enroll in a Simple IRA, 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b) to their employees.

The CalSavers program is portable much like a regular Roth IRA. There are no employer contribution requirements to each employee’s IRA. Employees can choose to invest in target retirement funds, an ESG or Environment, Social, Governance fund (DRAKX), Core Bond Fund (SSFEX), two global equity funds (SSGLX & SSSYX), and a CalSavers Money Market Fund (GVMXX). Employees will have their contributions automatically invested into the Money Market Fund unless otherwise stated.

Penalty for Not Offering a Qualified Retirement Plan

Failure to provide a retirement plan by June 30th will make the business subject to penalties. Penalties will start at $250 per eligible employee after 90 days of non-compliance and an additional fine of $500 per employee after 180 days.

If you have a small business with 5 or more W-2 employees, now is the time to set up a qualified retirement plan for your employees. You do not want to wait until the last minute to set one up for your employees and possibly face penalties. We can help navigate you to the right retirement plan administrators based on your business’s unique needs.

Please contact us at 310-909-6135 or email us at info@solidhealthinsurance.com for us to better assist you. At Solid Health Insurance Services, we strive to help our clients find the right health, dental, vision, life, and long-term care insurance which best fits their budget and medical needs.