Millions of Californians lack access to affordable retirement options. In an effort to increase employee retirement, in 2020, California mandated employers to offer employees a retirement plan. The mandate allows employers who can’t provide a retirement plan to enroll in California’s payroll deduction IRA, CalSavers. 

The mandate, which went into effect June 30, 2020, is being introduced in phases. In 2021, the mandate applied to employers with 50 or more employees.  On June 30, 2022, the mandate will apply to employers with 5 more employees.

CalSavers Specifics:

            CalSavers aims to provide a low cost way for employers to help workers save in a Roth IRA. Employees have the option to opt out of the plan or join. Those who join will have 5% of their gross pay deducted from their payroll. These employees also have the option to choose their own contribution rate. Depending on how they choose to save, employees will pay from 0.825% to 0.95% of their annual pay to Assets Under Management (AUM) fees. Those with higher earnings are eligible for lower contribution limits. 

            Workers’ Roth IRAs come with an annual contribution limit of $6,000 for people under 50 years old and $7,000 for those over the age of 50. When employee’s change jobs, their CalSavers account comes with them as the program is designed to be transferable. 


            Although employees are not required to enroll in CalSavers, employers are required to provide a qualified retirement savings plan. Failure to do so will result in employer fines. Any employer who fails to comply with the mandate will be required to pay a penalty of $250 per eligible employee after a 90 day notice. After 180 days of non-compliance, employers must pay another $500 per eligible employee. 

            California is the most recent of many states to mandate retirement plans for businesses in an attempt to provide accessibility to those who did not previously have it. It’s still too early to predict how much the inclusion of state-run retirement programs will contribute to closing the retirement gap. However, the program acts as a good start for fostering financial stability among more Californians.

            You can learn more about the CalSavers programs here: