©2025 Seyfarth Shaw LLP www.seyfarth.com 2025 Cal-Peculiarities | 335 8.5.3 Disclosures for deferred compensation plans California employers who offer employer-managed deferred compensation plans must provide each employee, before the employee’s enrollment in the plan, written notice of the reasonably foreseeable financial risks concerning participation in the plan, together with historical information to date as to the performance of plan investments and documents showing the employers’ financial condition through at least the immediately preceding year. Employers that directly manage investments of such a plan must also provide quarterly reports for each plan investment fund and the actual performance of the employee’s investment.70 8.6 CalSavers Retirement Savings Program CalSavers is a state-run program governed by the California Code of Regulations and overseen by the California Secure Choice Retirement Savings Investment Board.71 When CalSavers was enacted, participation was mandatory for an “eligible employer,” which was defined as any private California employer with five or more employees at least one of whom is age 18 or older, that does not sponsor a tax-qualified retirement plan.72 However, on August 26, 2022, SB 1126 amended CalSavers to expand the definition of “eligible employer” to include, with certain exceptions, a person or entity engaged in a business, industry, profession, trade, or other enterprise in the state, whether for profit or not for profit, that has at least one eligible employee and that satisfies the requirements to establish or participate in a “payroll deposit retirement savings arrangement.”73,74 As a result, any private California employer with one or more eligible employees is now also subject to CalSavers. The amended mandatory registration deadlines are as follows: Employers with more than 100 employees were required to register by September 30, 2020. Employers with more than 50 employees were required register by June 30, 2021. Employers with five or more employees were required register by June 30, 2022. Employers with four or fewer employees must register by December 31, 2025.75 Sole proprietorships, self-employed individuals, and other business entities that do not employ any individuals other than the owners of the business are exempt from CalSavers.76 Under CalSavers, employees make after-tax contributions to Roth IRAs that are created on their behalf. CalSavers also has an automatic enrollment feature, meaning that unless an employee opts out (or elects a different contribution rate) within 30 days of receiving enrollment materials, the employee is automatically enrolled at a contribution rate equal to 5% of compensation. Thereafter, a 1% automatic escalation applies each January 1, up to maximum of 8%.77 Absent an affirmative investment election, contributions are invested in a capital preservation investment (CalSavers Money Market Fund) for 30 days. After those 30 days have elapsed, unless the employee makes an alternative election, contributions (and earnings) are invested in the applicable target date funds based on the employee’s age and assumed retirement at age 65.78 Employers pay no fees; instead, as of June 1, 2023, participants pay fees based on a combination of a Fixed Account Fee ($4.50 per quarter ($18.00 annually)) and Annualized Asset-Based Fees (ranging from 0.325% to 0.49% of the account balance, depending on the investment choice(s)).79 CalSavers adopted activity-based fees for employees who receive paper documents ($1.25 per quarter or $5 annually) or request a paper check for a distribution ($5 per check).80 A challenge to the program as being preempted by ERISA was rejected by the Ninth Circuit.81
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