Author Topic: CalSaver Program  (Read 1035 times)

robartsd

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CalSaver Program
« on: July 17, 2019, 11:37:34 PM »
California recently launched a program to serve employees of small businesses that don't offer employer sponsored retirement plans. Employers with 5 or more employees that do not offer an employee sponsored plan will need to register employees for paycheck deductions into a CalSavers Roth IRA. The program defaults to 5% of gross pay in the first year and increases by 1% of gross pay until saving 8% of gross pay. Of course employees can opt in/out at any time, but the default is to contribute.

The good:
  • default to saving for retirement - someone accepting the defaults and working for 35 or more years should have a reasonable retirement fund when paired with Social Security
  • Investment choices are reasonable
  • no cost to employers

The bad:
  • administrative fee is 0.825%-0.95% of AUM
  • this is just a IRA, no real new opportunities for these employees to save, just a default to savings with high AUM fee
  • currently only Roth IRA, but they plan to add Traditional IRA