Did you know as California employer with 5 employees or more will have to offer a qualified  retirement program or need to enroll in CalSavers? The deadline for this is June 30th! This  law is also required by any Marijuana Related Business. 

CalSavers is required for any company that does not offer a retirement benefit. The good  news is that as a cannabis company there are alternatives to this state program. Below are  some high level differences between CalSavers and other retirement programs that will  meet this state mandated requirement. Click the learn more button below to schedule a meeting with one of our 401k consultants.

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What will happen if I miss the program adoption deadline?  

If employers miss adoption deadlines or fail to allow employees to participate in the program, they can face penalties of $250  per employee if they don’t comply within 90 days of receiving notice. The penalty then increases to $500 per employee if the  employer fails to comply within 180 days of receiving notice. 

It May Be Time to Offer an Alternative to the CalSavers Program 

While 401(k) plans are primarily intended to help employees prepare for  retirement, they can also offer compelling employer benefits, including: 

  • Attracting and retaining talent68% of workers say a retirement plan is a critical factor in deciding whether or not to accept a job
  • Tax credits– The SECURE Act permits an eligible small business to claim a tax credit for adopting a new 401(k) plan and/or a new automatic enrollment feature:
    • Qualified startup costs– Before the SECURE Act, a small business could claim a tax credit equal to 50% of their “qualified startup costs,” up to a $500 limit. Now, the limit is the greater of (1) $500 or (2) the lesser of (a) $250 multiplied by the number of non Highly Compensated Employees (non-HCEs) eligible for plan participation or (b) $5,000. This credit is available for up to three years.
    • Automatic enrollment- Small businesses can earn an additional $500 tax credit by adding an automatic enrollment feature to a new or existing 401(k) plan, which is available for each of the first three years the feature is effective.
  • Tax deductions

    • Employer contributions– When an employer allocates a safe harbor, matching, and/or profit sharing contribution to their 401(k) plan participants, they can deduct the amount contributed. The deduction is limited to 25% of the total compensation earned by plan participants during the year. Total compensation includes elective deferrals, but deferrals are not counted against the 25% deduction limit. For 2021, the maximum compensation that can be taken into account for each participant is $290,000 
    • Administration fees– When 401(k) administration fees are paid by the plan sponsor, plan participants are not the only beneficiary – the owners can deduct the fees as a business expense. This approach can be a win-win for plan participants and business owners – who often pay the lion’s share of administration fees paid from plan assets.
  • Incentivizing performance– A profit sharing contribution can be allocated among 401(k) plan participants using dramatically different formulas. New comparability is the most flexible formula. It allows an employer to allocate multiple contribution rates to different employee groups – or even a different rate to each employee. Most often, employers use this flexibility to allocate larger contribution rates to business owners or other Highly Compensated Employees (HCEs), but it can also be used to reward employees for high performance.

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