What This Means for Employees
When CalSavers is open for business statewide on July 1, 2019, employees who work for a participating employer will be able to make an automatic payroll contribution into their personal CalSavers IRA account. An employee can choose not to participate at any time. The account will stay with the employee from job to job throughout their career.
How do employees participate?
Participation in CalSavers is completely voluntary for employees. If an employee enrolls, but decides they no longer want to participate, they may opt-out of the program at any time. Participating employees may also choose to change or stop their contributions at any time.
How do participants contribute to their account?
Once enrolled, participants will contribute to their account via automatic contributions from each paycheck. Employees can choose to set their own contribution rate at any time. If a participant does not set their own rate, they will contribute a default rate of 5%.Unless they choose otherwise, their contributions will increase by 1% each year until reaching 8%.
How will contributions be invested?
Participants can choose their investments at any time. If they don’t make an affirmative choice, their contributions will be invested according to the default investment types, with the first $1,000 in contributions invested in a capital preservation fund and each dollar contributed above that amount would be made into a target-date fund selected by the participant’s age.
Participants will have the option to choose among a small menu of investments that also includes a high quality bond fund and a global equity fund.
Will there be a cost to participate?
As in any retirement plan, there will be a small administrative fee applied to savings to pay for the costs of the program. The fees will vary between 0.82% and 0.92% depending on the investment option chosen by the participant.
Could an employee take money out in case of an emergency?
The Board understands that in emergency situations participants may want to access their retirement savings. However, early withdrawals from retirement plans may be subject to certain taxes and penalties due to federal laws. For more information, please visit the following page on the Internal Revenue Service (IRS) website.
What happens if an employee changes jobs and their new employer doesn’t participate in CalSavers?
CalSavers accounts will be portable. The employee’s CalSavers account will remain active throughout their career unless they choose to stop participating, so they can continue to contribute through direct contributions from their bank account.