Final Deadline for California Mandated Retirement Benefits
We’ll cut straight to it: business owners with 5+ California employees are required to offer a company-sponsored retirement plan by June 30, 2022, or face fines. If your business is not currently offering a retirement plan, read on to learn your options:
Option one: Enroll through CalSavers
CalSavers is California’s retirement savings program, and provides employers means to create an individual retirement account (IRA) for each eligible employee.
CalSavers is a Roth IRA program, meaning In 2022, contributions through post-tax deductions can be up to $6,000 (plus $1,000 more for taxpayers who are 50+). Though the program is better than nothing, there is still a heavy manual administrative load for employers. CalSavers may also lack some of the flexibility and investment fund offerings your business may need and employees desire.
Option two: Choose a private 401(k) provider
Offering a 401(k) plan through a private provider can impact the growth potential of your plan.
An employer-based 401(k) or 403(b) retirement plan reduces the amount of wages reported on your tax return, thus lowering your taxable income. For 2022, up to $20,500 is allowed for contributions. Workers who are 50 and older can make an additional $6,500 in catch-up contributions.
What happens if I do nothing?
Employers will receive fines for failure to provide a retirement savings option for their employees. Fines start $250 per eligible employee for 90 days of non-compliance and jump to $500 after 180 days.
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