If you were to speak to experts on retirement savings, many would say that America is facing a “retirement crisis.” The United States currently has a retirement gap savings of more than $6 trillion, and 35 percent of U.S. households don’t participate in any retirement savings plan.

In California, even before the pandemic, an estimated 7.5 million people — about half of all employees — lacked access to a workplace retirement program, according to PEW Charitable Trusts. Of those 7.5 million Californians who did not have access to a workplace retirement plan, two-thirds worked for businesses with fewer than 100 employees.

CalSavers, California’s new state-run retirement benefits program, launched in July 2019, strives to change that, with support from Silicon Valley Community Foundation’s financial stability grantmaking strategy. With the implementation of CalSavers, by 2022 all businesses with more than five employees will be required to either facilitate contributions to CalSavers or offer a plan of their choice from the private market.

“CalSavers is the beginning of a new day for the millions of California small businesses and employees struggling to access retirement savings,” says Mark Herbert, California director for Small Business Majority, a nonprofit working to empower entrepreneurs and small businesses through advocacy, education and research. “It will go a long way toward leveling the playing field for the many small firms that lack the resources to enroll their employees in a retirement savings program,” he says. “We are excited to partner with Silicon Valley Community Foundation so we can help educate small-business owners, their employees and others about all the good the program will do for California’s small firms.”

Professionally managed by a third party, CalSavers allows employees to make automatic payroll deductions to contribute to their retirement accounts. Since small businesses often don’t offer retirement plans because of the cost, complexity and liability, CalSavers was designed to be easy for small-business owners to implement and to remove their financial liability. After registering, businesses simply need to add eligible employees and submit payroll contributions.

Employee participation in the program is voluntary. Employees can choose how much to contribute or, if they don’t, will contribute to an individual retirement account at the default rate of 5% of gross pay. Employees can opt out at any time. When workers leave a job or move to a new job, their savings stay with them. No bank account is needed, and self-employed workers can sign up for the program on their own.

In 2019, SVCF issued a $100,000 grant to Small Business Majority to support a yearlong project that engaged underserved small-business owners and their employees around CalSavers. To keep the program taxpayer-neutral, no funding was allocated for outreach by the State of California. SVCF’s grant funds have been critical in program outreach.

For more information, visit the CalSavers FAQ page.