To CalSave or Not to CalSave — That is the Question

It looks like the Biden administration won’t attempt an answer


According to Northwestern Mutual’s Planning & Progress Study, one in five Americans have saved nothing for retirement. Experts contend, then, that employers need to do the heavy lifting and push their employees to save for their future.

To be sure, employees are much more likely to save for retirement when their employers offer some type of retirement plan, be it a 401(k), SEP, SIMPLE or a pension and/or a profit-sharing plan. In recent years Roth 401(k) plans have become popular, too.

If the employee’s company doesn’t offer a plan, however, California has taken the bull by the horns and made it mandatory to offer a pension plan by the following schedule:

● Businesses with more than 100 employees: 09/30/2020
● Businesses with more than 50 employees: 06/30/2021
● Businesses with 5 or more employees: 06/30/2022
Employers now need to opt-in to CalSavers by visiting the CalSavers. com website and following a step-by-step guide, which involves sharing employee information and setting up payroll deductions. Although there is no cost to the employer, depending upon which investment options are selected, the employees will pay a fee ranging from 0.825% to 0.95% of their account balance, taken out directly.
● These accounts will be Roth IRAs (and thus not deductible from earnings) with the inherent under and over age 50 deposit guidelines.
● There is no cost to the employer, but there are no employer matching contributions allowed either. Participating employees have an option to re-characterize their contributions as a traditional IRA.

● Investment options available are: target date funds, money market funds, core bond funds, global equity funds and sustainable balanced funds.

● If employers miss their applicable option deadlines or fail to allow employees to participate, penalties are $250 per employee if they don’t comply within 90 days of receiving notice. This escalates to $500 per employee if they fail to comply within 180 days of receiving notice.
● Employees opting into CalSavers are allowed to contribute 5% of their after-tax pay toward their CalSavers’ account. They may also opt out of participating if so inclined.
The DOJ argued that under ERISA guidelines the CalSavers’ program is illegal. An Obama era exception granted CalSavers an exemption (which was overruled by the Trump administration). The Biden administration has taken a different approach (see sidebar “New Administration Neutral with CalSavers”). It is also interesting to note that the Howard Jarvis Taxpayers Association is currently litigating this issue in federal court. They assert that CalSavers is an unnecessary government program and illegal under federal law. Instead, they advocate that there are many programs to assist private-sector workers without an employer-sponsored retirement plan, citing traditional and Roth IRAs, etc.
Another argument the Jarvis Taxpayers Association is asserting against the CalSavers’ program is that even with its booming economy, California public pension funds are in financial difficulty to the tune of tens of billions of dollars in debt (CalPERS & CalSTRS). You can sign up for weekly Howard Jarvis Taxpayers Association updates by going to the news section at Information is also available at
New Administration Neutral about CalSavers

As Cal Broker was going to press, news broke that the Biden administration would not pick a side when it comes to CalSavers. According to the website Pensions & Investments ( “The Department of Labor is no longer backing a twice-dismissed challenge to the CalSavers program, according to its Feb. 5 filing with the U.S. District Court for the Eastern District of California in Sacramento.” The Trump administration threw its weight behind the challenge filed by the Howard Jarvis Taxpayers Association, but the acting secretary of labor for the Biden administration notified the court that he does not wish to be included in the amicus. CalSavers Executive Director Katie Selenski told P&I that she wouldn’t comment on pending litigation.

MONTE MERKEN, DFP, HIP, LPRT, LUTCF, has had a 50+ year career in insurance. He is currently a personal producing general agent. Early in his career he was a sales manager at Prudential. He is a past president of GSBLUA, NAIFA-Los Angeles, and VCAHU. He has been an instructor and moderator of LUTCF, RHU, and DOI courses. Monte received the distinguished Will G. Farrell Public Service Award in 2017 from NAIFA-Los Angeles & Society of Financial Services Professionals-Los Angeles/Pasadena.
Monte can be reached at: