Understanding CalSavers, California's Mandatory IRA Plan Often Missed by Home Care Agencies

Caoimhe Walsh

Written on 5 July, 2024
CalSavers has no employer contributions and no employer fees. But failure to sign your caregivers up can result in costly fines. Here’s what home care agencies need to know about California’s employee retirement plan program.

What Is CalSavers? 

The CalSavers Retirement Savings Program is a state initiative that helps employees save for retirement. It allows employees to contribute a percentage of their gross salary. 

By default, savers’ accounts are after-tax Roth IRAs. However, caregivers can choose to recharacterize them as traditional IRAs instead.

CalSavers accounts are highly flexible. Your caregivers can opt out at any time or adjust the percentage of their salary that they contribute. But, your home care business cannot contribute to or match caregivers’ contributions to their accounts. 

Is CalSavers Mandatory? 

If your home care business has at least one Californian employee aged 18+, you must either sign up for CalSavers or sponsor an alternative retirement plan.

However, there are two exceptions to this rule. First, you do not need to offer a retirement plan if the only employee is also the business owner. 

Secondly, if you employ fewer than five people, your deadline to sign up is December 31, 2025.

Should You Sign Up for CalSavers or an Alternative Retirement Plan?

CalSavers is convenient for home care agencies and caregivers alike. 

For home care agencies, there are no fees, no contributions, and no need to chase after employee responses. For caregivers, it’s easy for them to control their income and retirement savings by adjusting the amount they contribute. 

But the biggest benefit is that CalSavers accounts are portable. It doesn’t matter if an employee changes companies or works multiple jobs: their retirement plan will stay the same.

However, home care agencies should also be aware of CalSavers’ limitations. It’s not a 401(k) so caregivers are taxed on their contributions. And, if you want to match caregivers’ contributions to their retirement plans, you’ll need to sponsor a different employee retirement plan. 

This is particularly relevant considering the recently signed Secure Act 2.0. If your home care business has fewer than 100 employees, you can receive significant tax credits to help you match employees’ retirement fund contributions for up to five years. 

In some cases, these tax credits will represent 100% of your contributions. That means that eligible agencies could effectively match caregivers’ contributions for free.

Understanding CalSavers: What Home Care Agencies Need to Do

To sign up to CalSavers, register your business with your Federal Employer Identification (EIN) or Tax Identification Number (TIN).

Within 30 days of registering, you must upload your roster of eligible employees. CalSavers will then contact your staff to ask if they want to opt out. Employees have up to 30 days to opt out or be auto-enrolled.

After the opt-out period has passed, you must begin deducting employees’ contributions from their paychecks and sending them to CalSavers.

CalSavers will notify you if employees change their contribution amounts or opt out so you can adjust their deductions.

CalSavers Retirement Plan Deadlines to Be Aware Of

Key deadlines for home care agencies include:

December 31, 2025: The last date for agencies with fewer than five employees to sign up.

30 days: You must upload employees’ details within 30 days of either registering with CalSavers or hiring a new eligible staff member.

7 days: After deducting caregivers’ contributions from their paychecks, you have seven days to send them to CalSavers.

Streamlining Home Care in California

Running a successful home care business means staying on top of countless details: retirement plans, patients’ insurance details, permit renewals, tax deadlines, profit margins, marketing strategies, etc.

And all that’s on top of caregivers’ availability, home care patients’ services, and timesheets.

This is where ShiftCare’s home care software can help out. It allows you to quickly schedule your team, fill empty shifts, update client care plans, check caregiver paperwork is up to date, and more. 

Discover how the right tools can simplify your workload. Try ShiftCare for free.

How does CalSavers work in California?

Businesses deduct a percentage of employees’ gross income from their pay slips and send it to the employees’ CalSavers accounts. Employees can opt out or adjust the percentage at any time.

What is the penalty for the California retirement mandate?

After 90 days, California businesses will be fined $250 per eligible employee that has not been offered and enrolled in either CalSavers or an employer-sponsored retirement plan

What is the mandatory retirement age in California?

There is no mandatory retirement age in California

Are California employers required to offer health insurance?

Federal law requires California employers to offer health insurance to full-time staff members if they have 50+ full-time equivalent employees

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