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New Employer Requirements For Offering Retirement Plans

May 3, 2021, by New City Insurance

Person Checking retirement plan requirements on the LaptopFor decades, there has been a growing crisis in the United States, which despite efforts from congress, has roughly half of Americans saying that they have not properly saved enough to maintain their standard of living upon retirement. With uncertainty surrounding the future of programs like Social Security, states have begun to take this matter into their own hands. Employer-sponsored retirement plans come with retirement plan requirements and they enable employees to save money for retirement using plans like 401(k)s and SIMPLE IRAs. These savings vehicles offered by many employers generally allow workers to save on a tax-advantaged basis.

Under an employee retirement plan, employees choose a percentage of their paycheck to invest in a retirement plan each pay period. The funds are directly taken from each paycheck without the need for intervention from employees.

A growing number of states have released new programs that require businesses that meet certain criteria to provide employees with access to a retirement plan. California and Colorado, in particular, have experienced some of the biggest changes to employer-sponsored retirement planning.

CalSavers Program In California

CalSavers is a new retirement savings program in California that was established to give employees an easy way to save for retirement. The program applies to private-sector workers whose employers do not currently offer any type of group retirement plan.

California employers are required by state law to implement CalSavers if they do not offer an employer-sponsored retirement plan and have five or more employees. All eligible employers can register at any time prior to their registration deadline:
San Francisco Panorama View where there are new retirement plan requirements

  • More than 100 employees: Deadline passed 9/30/2020
  • More than 50 employees: Deadline 6/30/2021
  • More than 5 employees: Deadline 6/30/2022

Businesses that are not offering retirement plans by the deadline are required to register for the program, set up and manage their accounts and manage employee contribution submissions with each payroll. The state must also be notified of each new hire within 30 days.

CalSavers is mandatory to all businesses that meet the criteria and failure to comply can lead to a penalty for each eligible employee. Any employee in California who does not currently have access to an employer-sponsored retirement plan and is employed by a company with at least five employees is eligible to participate in the program.

CalSavers is a Roth IRA, a retirement account that entails post tax contributions and enables account holders to withdraw funds tax-free. As a Roth IRA, employees can only enroll in the plan if they meet certain income thresholds.

For employees filing as single, head of household or married filing separately, the modified adjusted gross income limit is $139,000. For employees filing married filing jointly or as a qualifying widow or widower, the limit is up to $206,000.

Secure Savings Program In Colorado

According to the U.S. Bureau of Labor Statistics, nearly 40 million employees in the private sector do not have access to a retirement plan. In Colorado, the Secure Savings Program was introduced to provide employees access to a retirement plan. Under this program, any business with more than five employees in Colorado must offer a way for employees to save for retirement.

The law was passed on July 21, 2020, and mandates businesses that meet the criteria to offer an individual retirement account (IRA) that is funded through automatic payroll deductions. For employers, the rollout of the program is staggered and employers that already offer a 401(k) plan or other qualified retirement plan are exempt from having to enroll.

Employers can enjoy several tax benefits when they offer a retirement plan to employees. Colorado plans to establish grants to help minimize the cost of offering retirement plans and to encourage more businesses that may not meet the criteria. Employers who do not comply with the program may be fined for each eligible employee per year.

Capital Building in Downtown Denver Colorado where there are new retirement plan requirements
Any employee age 18 or older who has been employed in Colorado for at least 180 days is affected by the Secure Savings Program. Employees are permitted to withdraw funds from their account without penalty for a minimum of the initial two years of enrollment within the program.

Similar to other Roth IRAs, the amount that an employee can contribute is based on their age, marital status and income. In 2021, the maximum contribution amount is $6,000 for employees under age 50 and $7,000 for employees age 50 and above.

Employers unfamiliar with Colorado’s Secure Savings Program must ensure that their payroll system is ready to accommodate these changes and that all requirements are put in place to avoid costly fines.

Additional States With Group Retirement Plan Requirements

OregonSaves – Oregon was the first state to implement any mandates for employers to offer group retirement plans, and currently requires all businesses with 5 or more employees to offer a group retirement plan.

Illinois Secure Choice – Illinois requires employers with over 25 employees and at least 2 years in operation to provide access to Illinois Secure Choice or a private retirement plan.

Speak With New City For More Info On Retirement Plan Requirements

Although the new retirement plan requirements established in California, Oregon and Colorado have become widely-known, this trend also impacts other areas of the United States. Other states like Texas, New York, New Jersey, Nevada, Washington, Florida, and Arizona are also developing or have developed retirement plan programs that impact small employers.

It should be noted that managing system integrations, administering contributions, and the additional reporting requirements of the state run programs can come with additional employer liability. The state run programs also have investment and eligibility limitations.

Retirement plans can be beneficial to both employers and employees. Employers need to become familiar with the retirement plan requirements in their state to avoid the penalties associated with noncompliance, and should become educated on the various options available both via the state and private administrators. For more information or to speak with an experienced employee benefits firm, reach out to a benefits consultant at New City Insurance.

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New City Insurance
New City Insurance
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Carol Zhang
Carol Zhang
04:29 06 Mar 22
As a rapidly expanding national media organization, the employee benefits strategy and administration that New City has provided us during our growth has been invaluable. They have been proactive about informing us of the different benefit strategies available to us as we grow as well as managing the additional compliance laws and reporting requirements at each stage of our growth.
Claudia Villalobos
Claudia Villalobos
20:14 03 Mar 22
New City Insurance made navigating through all the health insurances super EASY. Their documents are highly informative, professional, and easy to work with. Thank you for making the process of choosing a health plan so simple. You guys are THE BEST!
Philippe Salas
Philippe Salas
17:02 22 Feb 22
I never expected to have a good time talking to an insurance salesman, but let me tell you Brendan was quite the treat. He was very helpful explaining the options and has a wonderful sense of humor. I hope to speak with him every time I call.
Jennifer Polito
Jennifer Polito
17:15 09 Feb 22
Super easy enrollment process. Fast and friendly customer service. If you are looking for an insurance company that is there for you every step of the way I highly recommend New City Insurance.
Rocky Salas
Rocky Salas
23:46 07 Jan 22
So friendly, I hope to speak to him again in all my future insurance needs.
Rocky Salas
Rocky Salas
23:38 07 Jan 22
So friendly and soft spoken. I hope to speak to him again in all my future insurance needs.
Jose Brena
Jose Brena
13:20 06 Jan 22
Eric Calciano has been extremely helpful in finding and selecting the right insurance coverage for our company. With many options out there Eric assisted us on getting a low cost provider saving more than 20% than from our competitors and providing excellent coverage for our employees.
Anastasia Beaverhousen
Anastasia Beaverhousen
17:05 28 Dec 21
Signing up for insurance was quick and easy. Felicity Sundsboe
SFCC
SFCC
22:08 29 Nov 21
Jeff Stoltey and his team provide excellent customer service. Jeff has always provided my company SFCC with straightforward options. I went to a larger insurance company only to RUN BACK to Jeff at New City Insurance. I recommend them to anyone needing insurance without hesitation.
Kevin Luby
Kevin Luby
19:13 22 Oct 21
Quick, easy & informative. We were able to secure quality insurance for our small business on a tight deadline. Thanks for the help New City.
Theresa Ruybol
Theresa Ruybol
19:30 01 Jul 21
Eric was so great with us. He was very patient and kind as we are a newer smaller organization who is growing rapidly. With that said, we had made our inquiry, he had great rapid response and mostly had to wait on me. Any request that we made and/or questions we had, he was great answering and helping us understand. Then when we were ready for all documents and to move forward, Brendan helped with getting that together and the two of them worked their magic on New City's end to notify me of what was needed, assist me in that process and confirming that all was complete and approved for the coverage. I just want to say thank you all again so much, as insurance has always been confusing to me, and you all made that process go a lot smoother.Thank you
Andrea Ordendorff
Andrea Ordendorff
21:06 07 May 21
I've been working with both Clayton and Brendan for well over a year. As the purchase of our dental practice was delayed well over 14 months they both patiently supported me and continued to make themselves available. When we were officially ready to sign up they made the whole process seamless and super easy. This team is highly knowledgeable, professional, supportive, and efficient! I can't thank them enough for everything they've done.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
jessica kavanagh
jessica kavanagh
19:53 13 Feb 20
Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
Tricia DeYoung
Tricia DeYoung
19:49 13 Feb 20
I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
Mike McClay
Mike McClay
19:36 03 May 19
My employer uses New City as their insurance broker, and I'm always amazed when I call in for assistance by how knowledgeable and attentive their staff is with my requests. Their online benefits platform makes selecting insurance plans pretty darn easy. I would highly recommend their services.
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