Security After Retirement in California
Following similar programs in Illinois and Oregon, the general populace in California is now free to contribute to a new state-sponsored retirement fund called CalSavers.
Just like a 401(k) or other savings index, CalSavers is designed for automatic contribution to via an employees paycheck.
November of 2018 is when CalSavers launched, and it already has funded 1600 accounts with a 5 percent savings rate at about $91 per person on average. The amount of eligible people who are opting out of the CalSavers program is low, at only 22 and a half percent.
Employers in California are compelled to fall in line, as by law they have to offer their workers a retirement plan, and if they don’t have their own system set in place, then CalSavers would be the default for employees.
This will be a slow process, as CalSavers only began on July 1st of this year, and employers have several deadlines by which they’ll need to comply. The fist of these deadlines is for companies with over 100 employees. They have to have their workers enrolled in CalSavers (or one of their own offered plans) by 2020. Companies with 50 employees have longer, with up to two years to comply. And small companies, those with five workers or more, have the full three years to make sure their workers meet the new California retirement standard.
This is a long time coming for this very populated state. According to research out of UC Berkeley Labor Center, less than half of working-age adults have a retirement plan. The majority have no savings at all. And those who have been contributing to retirement plans have typically not put in enough to sustain them through the duration of their golden years.
There have been a few speed bumps in the rollout process, though. CalSavers was even sued a year prior for not being in compliance with the Employee Retirement Income Security Act of 1974, which deals with oversight in regards to retirement plans for private companies. The court allowed CalSavers to continue rolling out the program regardless. This is on top of critics and other advisors who claim that CalSavers will actually get in the way of companies investing in their own private 401(k) plans which are often better for employees than what CalSavers is offering.
As of September, CalSavers is also slated to be an option for self-employed people, with bilingual options for Spanish offered via the app on through support as well.
While not the first state to offer a program like this, California is certainly the largest, with 20 different cities and states also planning to offer up a similar type of ultimatum for employers operating within their borders. While still in the process of coming together, it looks to be a significant change for retirement options lead by each state.
