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CalSavers: Decision Time

Decision time: CalSavers deadline looms for employers with >50 California employees

 June 30th marks the deadline for employers with more than 50 California employees to register for CalSavers, if they are not exempt from the program.  This three-part series is designed to assist employers in deciding whether they should offer their own retirement plan or participate in the CalSavers program.

As a qualified plan consultant my job is to bring structure and a process for helping employers make great decisions with their employer-sponsored retirement plans.  The three keys to this process are:

  1. Know your options
  2. Understand the marketplace
  3. Analyze those options within the context of your organization

Part 1 of this series begins with high level concepts for analyzing your options.

  • Motivation: is your organization simply looking to comply with the state’s requirements? If so, CalSavers is the best option.
  • Budget: budgets are tight for many organizations right now. But if you know there is no budget for offering a retirement plan today and you know there will be no budget for offering a plan in the future, then CalSavers is likely the best option for your organization.
  • Benefits: this item is somewhat related to Motivation. CalSavers is essentially just a conduit for employee savings.  If your organization has considered offering some sort of retirement benefit, then you may want to look to retirement savings plan alternatives such as simple IRA plans, 401(k)’s or 403b plans (non-profits).  These plans offer employer contributions, greater contributions limits, much greater resources to assist employees in planning for retirement, and more.  These alternatives offer employees a true employee benefit program.
  • Attract & Retain Talent: if your organization is finding it difficult to attract or retain talent, then alterative retirement savings plans such as a 401(k) or4 03(b) may add to the overall compensation package offered to employees. These plans can include vesting schedules for employer contributions which means employees may forfeit some (or all) of any employer contributions should they leave an organization early.  More, employer contributions to these plans are not subject to payroll taxes providing a less expensive method for compensating employees.