Recently, California Governor Edmund G. Brown, Jr. signed legislation that will create new retirement savings accounts for employees. The program will be called the California Secure Choice Retirement Savings Program.
The new legislation will require specified eligible employers to offer a payroll deposit retirement savings arrangement. Employees who do not have a workplace retirement account will automatically contribute 3% of wages to a new retirement account, unless they opt out of the program.
What Is an Eligible Employer?
- Under the law, an "eligible employer" is defined as a person or entity engaged in a business, industry, profession, trade, or other enterprise in the state (both for profit and not-for-profit) with five or more employees that satisfies the requirements to establish or participate in a payroll deposit retirement savings arrangement
- Federal, state, county, and municipal governments are excluded
Effective Dates and Implementation
- The program will be implemented effective January 1, 2017
- Within 12 months after the program is open for enrollment, eligible employers with more than 100 eligible employees that do not offer a retirement savings program must implement a payroll deposit retirement savings arrangement to allow employee participation in the program
- The threshold for eligible employers will be lowered to more than 50 eligible employees within 24 months after the program is open for enrollment
- Within 36 months after the program is open for enrollment, the threshold will be lowered to include all other eligible employers
Read PayState Update for more information on the new legislation in California.