Introducing CalSavers: A new way for small businesses to save for retirement

Small Business Loans
January 8, 2019

This guest post about the CalSavers Retirement Savings Program is from our partners at Small Business Majority — a national small business advocacy organization, founded and run by small business owners to ensure America’s entrepreneurs are a key part of a thriving and inclusive economy.

Small business owners often struggle to offer their employees a way to save for retirement, a fact that holds true nationally and here in California. In fact, 66% of the 7.5 million Californians who don’t have access to employer-sponsored retirement programs work for a small business with fewer than 100 employees according to the California Treasurer’s Office.

That’s why it’s great that California has introduced a new program to address this critical gap, the CalSavers Retirement Savings Program.

CalSavers is a workplace retirement savings program that enables small business owners and employees to make an automatic contribution from their paychecks into a personal IRA retirement account.

These accounts are overseen by the CalSavers Retirement Savings Investment Board and are entirely employee-funded. Employee participation is voluntary but it is opt-out, meaning employees are automatically enrolled but can contact a third-party administrator if they do not want to participate.

What else should small businesses and employees know about the program?

  • Accounts are portable, meaning they stay with you from job to job throughout your entire career.
  • The default contribution is 5% of your income, but participants can change their contribution amount. They can also set their contributions up to automatically increase by 1% annually up to 8%.
  • The program is also open to the self-employed, which means solo entrepreneurs can also take advantage of the program.

What does CalSavers mean for employers?

  • Employers do not contribute funds, manage accounts or provide financial advice.
  • Employers’ only requirement is to provide employee information to the program and facilitate a payroll contribution to the program each pay period.
  • Participation will eventually extend to all California small businesses with five or more employees that do not offer a retirement savings option at work. Businesses with fewer employees can choose to participate as well.

It’s important for small businesses to know they don’t need to do anything at this time to prepare. It will take a few years for the program to be implemented, and the biggest businesses are being phased into the program first.

While the smallest businesses don’t have to comply until 2022, they can opt-in sooner by joining the CalSavers pilot program. This gives small businesses a chance to try out the program early and provide feedback to the CalSavers Retirement Savings Program as it is being rolled out.  

“This is a win-win for small business owners and their employees,” said Robert Villarreal, executive vice president of a leading California-based small business lender CDC Small Business Finance.

“This program encourages Californians to save for their future while not burdening owners of independent businesses, many of whom want to support their employees,” he added.

The ability of small business employees to save for retirement will help these small businesses attract the most talented employees and boost employee morale.

The CalSavers Retirement Savings Program allows small business employers to provide a retirement savings option to employees without the administrative costs and overhead that can come with offering such plans.

If you want to learn more, or enroll your business, you can find more information here.

CDC Small Business Finance, a small business lender and nonprofit, is a supporter of initiatives that bolster the entrepreneur community such as the CalSavers Retirement Savings Program.

We do our part by offering several business-loan options with more flexible qualification requirements compared to more traditional lenders.