CalSavers: What you need to know

San Francisco Chronicle - Late Edition (Sunday) - - BUSINESS -

En­roll­ment: Any pri­vate-sec­tor em­ployer, in­clud­ing non­prof­its, that has at least five full- or part-time em­ploy­ees — at least one of whom is in Cal­i­for­nia — and does not have a re­tire­ment plan for work­ers, must reg­is­ter with CalSavers. The pro­gram will no­tify em­ploy­ers when they must reg­is­ter, start­ing with larger em­ploy­ers. Upon reg­is­tra­tion, they must up­load em­ployee names and con­tact in­for­ma­tion to CalSavers, which will no­tify em­ploy­ees that they will be au­to­mat­i­cally en­rolled in a Roth in­di­vid­ual re­tire­ment ac­count un­less they opt out. The em­ployer, or its pay­roll pro­ces­sor, must send em­ployee con­tri­bu­tions to CalSavers, which will han­dle em­ployee com­mu­ni­ca­tions and ac­count changes.

Con­tri­bu­tions: Ini­tially, all par­tic­i­pants will have a Roth IRA in their name funded by pay­roll de­duc­tions. Start­ing July 1, they can choose a tra­di­tional IRA in­stead, al­though a Roth IRA will al­ways be the de­fault ac­count. Par­tic­i­pants will have 5 per­cent of pay di­verted to the IRA, es­ca­lat­ing by 1 per­cent per year un­til the rate reaches 8 per­cent, un­less they choose oth­er­wise. Em­ploy­ers can not con­trib­ute to the ac­counts.

In­vest­ment op­tions: Em­ploy­ees can choose from a money market fund, bond fund, tar­get-date fund or global stock fund, all man­aged by State Street. If they make no choice, the first $1,000 will go into a money market fund, af­ter that into a tar­get-date fund.

Fees: An­nual fees range from 0.825 to 0.92 per­cent of ac­count as­sets, de­pend­ing on in­vest­ment choice. On a $1,000 in­vest­ment, that is about $9 a year.

Lim­its: In 2019, em­ploy­ees can in­vest no more than $6,000 ($7,000 if they are 50 or older) to this and all IRAs in their name com­bined. Em­ploy­ees can­not con­trib­ute to a Roth IRA if their com­bined house­hold in­come ex­ceeds cer­tain amounts.

With­drawals: With a Roth IRA, em­ploy­ees can with­draw the amount they put in any time tax- and penalty-free. If they take out more than they put in, the dif­fer­ence (their ac­count earn­ings) could be sub­ject to tax and penalty de­pend­ing on their age, the age of the ac­count and rea­son for the with­drawal. For tra­di­tional IRAs, dif­fer­ent rules ap­ply.

Porta­bil­ity: Em­ploy­ees can keep their ac­count when they change jobs.

For more, see www.calsavers.com.

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