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California Secure Choice Retirement Savings Program: What Small Businesses Need to Know

The California Secure Choice Savings Retirement Program, which went into effect January 1, 2017, develops a portable workplace retirement savings plan for private sector workers whose employers don’t offer a retirement plan. The program is run by the state and funded by modest employee contributions, so it offers minimal risk and cost for employers. Below is an overview of what small businesses need to know about the program.

What is the California Secure Choice Savings Program?

  • Secure Choice is a voluntary workplace retirement savings plan that enables small businesses and employees to make an automatic payroll contribution into a personal IRA retirement account overseen by the California Secure Choice Retirement Savings Investment Board.
  • The program is designed to be self-sustaining, so there will be no taxpayer funding and no employer or state liability for the program.

How will the Secure Choice Program impact employers?

  • Employers will not contribute to funds, manage funds or have any responsibility for financial advice. Employers must give employees the option to opt out of the program and use their existing payroll system to send employees’ contributions to the fund each month.
  • Small business owners support the Secure Choice Savings Program. Small Business Majority’s scientific polling found the two-thirds of small business owners in California support a state retirement savings program that would help small businesses and their employees save for the future.
  • Many small businesses would like to offer retirement plans to their employees—to help attract a talented workforce and boost employee morale—but can’t afford the overhead and administrative costs. The Secure Choice Savings Program provides a way for small businesses to offer their employees access to retirement benefits without incurring the associated burdens of employer- sponsored retirement programs.
  • Nearly 80% of those who work for small businesses do not have access to a retirement savings option at work; meanwhile, the small business market is not being adequately served by the financial services industry. The Secure Choice Program will help serve an underserved population that wants to save for retirement. 

What are the requirements for small businesses?

  • Small businesses don’t need to do anything at this time to prepare. It will take a few years for the program to be implemented, and the biggest businesses will be phased into the program first. When the program is fully operational, employers of five or more employees will be required to offer a retirement plan, or enable their employees to make an automatic contribution from their paycheck into their Secure Choice account. 
  •  The administrative requirements for employers will be minimal, and employees will choose whether they want to participate or opt-out of the program.
  • The 3 year phase-in period will be as follows:
    • Once the program is operational (likely 2019 at the earliest), employers with more than 100 employees will need to offer a retirement plan or Secure Choice within 12 months after the program is open for enrollment.
    • Employers with more than 50 employees will need to comply within 24 months (by 2020).
    • Employers with more than 5 employees will need to comply within 36 months (by 2021).

What businesses qualify for the program?

  • The program does not apply to businesses that meet at least one of the following criteria:
  • Have fewer than 25 employees;
  • Are less than two years old;
  • Already offer retirement plans.
  • Small businesses with fewer than 25 employees and the self-employed may opt in and enroll in the Secure Choice Savings program. Once enrolled, they can manage the payroll deduction that best fits their financial needs. 

Where can I find more information?