CalSavers: What you need to know
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.