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Rocklin, CA 95765

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Fax: 800-783-0083

Employers Now Required to Facilitate Retirement Savings Program for Employees

September 20, 2018 | Ryan Kagarakis

Does your company currently have a retirement savings program in place for your employees? If not, Senate Bill 1234 will soon require employers with five or more employees to create an employer-sponsored retirement savings program or facilitate in enrolling your employees in to the Secure Choice Retirement Savings program. The Secure Choice Savings Program is a state-sponsored retirement program that will allow employees to contribute their earnings into a retirement plan if their employer doesn’t already provide one. Employers with five or more employees will be required to either offer an employer-sponsored retirement plan or enable their employees to make direct payroll contribution to the employee’s personal Secure Choice Retirement account. This requirement will not go into effect until the Secure Choice program is fully operational, which is expected to be sometime in late 2018.

Employers who elect to enroll their employees in Secure Choice will have limited administrative responsibilities but they will be required to:

  1. Enable employees to make an automatic contribution from their paycheck into their Secure Choice Account.
  2. Transmit the payroll contribution to a third-party administrator to be determined by the Board.
  3. Provide state developed informational materials about the program to their employees.

Employers DO NOT have to match contributions and will not have any liability for an employee’s decision to participate in or opt out of the program.

The below table outlines how long an employer has to create their own savings plan, facilitate in enrolling their employees in the state-sponsored plan or have the employee opt out of the program:

Per section 1088.9 (c) of Senate Bill 1234, each eligible employer that fails to allow its eligible employees to participate in the California Secure Choice Retirement Savings Program on or before 90 days after service of notice by the director shall pay a penalty of $250 per eligible employee if noncompliance extends 90 days or more after the notice, and if found to be in noncompliance 180 days or more after the notice, an additional penalty of $500 per eligible employee. The language within the bill defines “eligible employee” as any person who is employed by an eligible employer.

As an employer, should you create your own employer-sponsored retirement program? Should you match contributions? Or should you let your employees go with the state-sponsored program? Employee benefits packages that include retirement savings plans provide an additional benefit to the employee they may help retain existing talent and attract new talent as well.

If you are considering creating an employer-sponsored retirement savings program for your employees we recommend that you consult with a financial advisor to help weigh the pros and cons of instituting a program that makes sense for your organization. As an employer, if you elect to set up a retirement savings program for your employees you will also want to consult with a commercial insurance advisor to make sure you are covered for employee benefits liability exposures as well as an ERISA bond. Lastly, if you have specific questions regarding the legal implications of this new law please consult with an attorney who specializes in labor related issues.


Ryan Kagarakis
Commercial Insurance Broker at Brown & Brown Inc.

Phone: 916.625.4616 | Direct Fax: 800.761.6733
rkagarakis@BBSACRAMENTO.COM
www.bbsacramento.com