California small businesses with 5 employees or more must meet a mandate by June 30, 2022
There is a mandate in California that small and medium-sized businesses need to comply with, as long as they have 5 or more employees on their payroll. What is this California retirement savings mandate we're talking about? Finhabits compiled some basic information that every business owner needs to know about this California mandate, and how to comply with it.
Do you own a business in California with 5 or more employees?
In the past, private-sector employers in California were not required to offer a retirement plan to their workers. The California retirement savings program mandate now requires more business owners to offer a qualified retirement plan or the state-sponsored option, and the deadline to choose one and register your businesses that meet the program requirements is June 30, 2022. The businesses required to comply with the mandate have 5 or more employees, full-time or part-time, who are at least 18 years old.
This policy does not come out of the blue. The automatic enrollment retirement policy mandate California bill was initially passed in 2016. This addition to retirement security is the first major change to this type of benefit since the establishment of Social Security in the 1930s and is now serving as a guide to other states also looking into creating a similar program for their residents.
What are your options to comply with the mandate?
Employers have the alternative to select a private retirement plan like the Finhabits 401k or a similar plan that qualifies. Choosing the state-sponsored plan CalSavers is not mandatory. However, keep in mind that June 30, 2022, is the deadline for small business owners to take action to meet the mandate requirements.
After the deadline, employers who fail to provide an optional retirement savings program to their employees could face penalties of $250 per employee. An additional penalty of $500 per employee will be added when noncompliance continues for 90 days, totaling $750 per employee for “sustained non-compliance.”
How could the Finhabits 401k plans help your business?
Depending on your business needs and what type of plan you want to offer to your employees, working with a private 401k provider could be a better alternative. The retirement plans Finhabits 401k are an alternative for businesses that may not have been able to offer their employees a plan in the past. The plans by Finhabits were designed with small and medium-sized businesses in mind; they are a simple, affordable alternative that offers support in both English and Spanish.
Latino business owners see their workers as an extension of their families, and they want to help them build economic security for the future. In California, Latinos working in the private sector are particularly disadvantaged — only three out of ten employees (or 31% of them) have access to a 401k or pension plan through their employer. That number is about 45% among White workers in the California private sector, according to a study from the UC Berkeley Labor Center.
As the first financial wellness platform in both English and Spanish, Finhabits includes behavioral nudges and educational content to help your workers get into the habit of investing for the future. To learn more about the Finhabits 401k plans for businesses in California, please visit Finhabits.com/401k or call 650-265-4010.
This material has been provided for informational purposes only, and is not intended to provide investment, legal or tax advice. Check with your tax advisor to determine what tax credits and tax deductions may be available for your business. Finhabits does not provide tax, legal or accounting advice.Investment advisory services offered through Finhabits Advisors LLC, an SEC registered investment adviser. Registration does not imply a certain level of skill or training. Past performance is no guarantee of future returns. There are risks involved with investing. Insurance services offered through Finhabits Insurance Services LLC, a licensed producer in certain states. Finhabits Advisors LLC is not a fiduciary to insurance products or services.