CalSavers: New retirement savings plan can benefit all Californians

A retirement savings plan for all Californians 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, 7.5 million million people -- about half of all employees -- lack access to a workplace retirement program, according to PEW Charitable Trusts. Of those 7.5 million Californians who don’t have access to a workplace retirement plan, two thirds work for businesses with less than 100 employees. 

CalSavers, California’s new state-run retirement benefits program, will change that, with support from Silicon Valley Community Foundation’s financial stability grantmaking strategy. CalSavers launched in July 2019, and 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,” said 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 said. “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 and, 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. 

Earlier this year, SVCF issued a $100,000 grant to Small Business Majority to support a year-long project that engages 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, so these grant funds will be critical in program outreach.

“At SVCF, we've invested in outreach for CalSavers because we see the life-changing potential a program like this can have for low income workers,” said Financial Stability Program Officer Alexandra Bastien. “There are more than 13,000 businesses in Silicon Valley that do not offer a retirement savings program to their employees. That means that the critical conversation and education about retirement savings that for many people happens at work, may not be happening at all for these employees.  We see this program as a public benefit that will help workers age with dignity. We believe that through proper education and outreach, CalSavers will reduce poverty and will have generational impact."

Have questions? Visit the CalSavers FAQ page.

Learn more about SVCF’s grantmaking strategies here.