Are you a business in California and have 5 or more employees?
This year, retirement plans will be required for California employers with five or more employees. The legislation passed in 2016 required all employers with five or more employees to offer a retirement savings account. This law also applies to nonprofit organizations. 2022 brings the final implementation phase requiring organizations with 5-49 employees to comply by June 30, 2022. If you already sponsor an employee-retirement plan, you are meeting this requirement.
The deadline for implementation for organizations with more than 49 employees has passed, and the Franchise Tax Board is in the process of enforcement. More information on how to respond if you have received a notice is on this web page: https://www.ftb.ca.gov/pay/collections/calsavers/index.html.
The obstacles to offering retirement plans for smaller businesses and organizations usually have to do with the costs of the savings plans. A state-run plan called CalSavers has been put in place to streamline the implementation process and offer employers a no-cost option. The alternative to complying with the new law is to set up a traditional 401(k) plan or pension plan.
In 2018, CalSavers launched as a way for employers to comply with the new legislation. Organizations can sign up directly on the CalSavers website – www.calsavers.com. The legal structure of the CalSavers plan is a Roth IRA. Like a 401k plan, the employee specifies a percentage to be deducted from their paycheck. The employer must enroll their employees when they open the plan or when a new employee is hired, but employees can opt out. The CalSavers plan does not allow for employer contributions, and the investment choices are limited. While these limitations exist, all the costs are paid by the employee and deducted from their account.
Did you receive a collection notice from CalSavers?
If you received a CalSavers collections notice from FTB, you either haven’t registered or have yet to comply with the CalSavers Retirement Savings Program requirements.
Common reasons for the notice would be, if you did not:
- Provide eligible employee information on time
- Provide new eligible employee information on time
- Remit employee contributions
What you need to do:
There are two ways to respond to your notice:
1. Complete your requirements
To comply with the CalSavers Retirement Savings Program, visit the CalSavers Employers webpage to register or complete your requirements. You will need the CalSavers access code from your notice and Federal Employer Identification Number (FEIN).
If you received our first notice, including a $250 penalty per employee, you either haven’t registered or have yet to comply with the CalSavers Retirement Savings Program requirements. If you do not complete the CalSavers Retirement Savings Program requirements within 90 days from the date of the notice, you will receive an additional $500 penalty per employee ($750 total per employee, including the first penalty).
Pay the penalty amount
- Send a check or money order payable to Franchise Tax Board
- Provide your Reference ID (from your FTB notice) on your payment
- Mail your payment with the Pay-By-Mail voucher included with your notice to: State of California
IICP MS A116
Franchise Tax Board
PO Box 2966
Rancho Cordova CA 95741-2966
2. If you disagree with the notice
The CalSavers Retirement Savings Board can help answer questions about the program, your registration, the penalty balance due, or issues related to your account. FTB does not have the details about your penalty status.
Appeal your penalty
You may appeal your penalty within 90 days of your first FTB notice date. You cannot appeal your penalty after FTB issues the final notice. If you’ve already contacted the CalSavers Retirement Savings Board and would like information on our appeal process, contact FTB.
Weekdays, 8 AM to 5 PM
- 916-845-7892 (outside the U.S.)
Regardless of the number of participants, employee benefit plans require filing a Form 5500. There is a 5500EZ for those plans with under 100 participants. Once you are above 100 participants, the plan has the additional requirement to be audited.