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It’s already January 2022, and we have some important tax updates for you. For starters, California and Colorado require employers with five or more employees to submit a retirement plan for their workers. In California, in an effort to help people save, they’ve already required that business owners offer a retirement plan for a business with more than 50 employees.Â
The deadline for implementing this is June 30, 2022. It can be offered using a private-market option (via a 401(k)) or through the CalSavers program offered by the state. CalSavers is an alternative, less costly choice to provide your workers with a retirement savings program for private-sector workers whose employers do not offer a retirement plan. This option allows employers the opportunity to help their employees save for retirement. It has no employer fees, no fiduciary liability, and minimal employer responsibilities.
Enrolling in CalSavers is easy and fast. If you are a small business owner and want to begin a new 401(k), employers may be eligible for tax credits of $500 per year. And it is applicable only if you note particular automatic enrollment provisions. It’s a low-cost way to save money, allowing employers to help workers save by investing in a Roth IRA.
As a worker, you can pick your contribution rate (stay with the default contribution or just opt-out) and choose investment funds from an investment list or use the default target-date fund. Small business owners with 5-50 employees will have until June 30, 2022, to comply with this mandate.
As an employer, you can register through the CalSavers website, and if you are providing a qualified private-market alternative (for example, a 401(k)), you can file for an exemption on this site. Once registered, you need to add the employees within 30 days of completing the registration. There are no fees or other costs for employers who enroll in CalSavers. (See https://edd.ca.gov/employers/calsavers.htm)
If you are an employer and miss the registration deadline, you will have to pay a $250 fine per eligible employee for non-compliance extending for 90 days or more after the notice. Should non-compliance go for 180 days or more after the notice, you will need to pay an extra $500 per eligible employee.
For more in-depth information on the deadline, you can read the full article here:
https://www.guideline.com/blog/what-you-need-to-know-about-calsavers-june-30-deadline/
Colorado’s Secure Savings Program
For Colorado employers, the requirement is that you have been in business for at least two years and haven’t offered a plan in the last two years. Read more here: https://humaninterest.com/learn/articles/colorado-secure-savings-program/
The program start date is still to be determined, but the state likely will begin implementing the program by October 2022 as participation becomes both automatic and mandatory for subject employers.
Employers and the Colorado Secure Savings ProgramÂ
The Colorado Secure Savings Program partners with New Mexico to provide the first-ever multi-state IRA program. It helps employees who need to liquidate and transfer money between accounts, stemming cashout leakage when changing jobs, and helping state-facilitated IRA participants who move states. It can also lower costs and increase portability for employees who move between Colorado and New Mexico. Employers are exempt from having to enroll in the Colorado Secure Savings Program if you offer a 401(k) or another qualified retirement plan, such as a legally compliant multiple employer plan (MEP).
Employers are also exempt if you have sponsored the following in the last two years:
- A qualified retirement plan under Internal Revenue Code Section 401(a), 401(k) or 403(a)
- A 403(b) tax-sheltered annuity plan
- A 457(b) deferred compensation plan
- A simplified employee pension (SEP) plan
- A savings incentive match plan for employees (SIMPLE 401(k) or IRA plan)
Non-compliant employers can be fined up to $100 per eligible employee per year. Enforcement won’t start until at least one year after the program is established (or one year after an employer is scheduled to enter the program).
Other states that are active in a state-sponsored retirement plan:
- Illinois
- Massachusetts
- Oregon
- Washington
For small businesses operating in states with retirement legislation, now is the best time to understand the program and get ready for it! You’ll also want to know your options. Read more here: https://humaninterest.com/learn/articles/what-is-a-state-sponsored-retirement-plan/
Other states that have passed legislation but aren’t active yet:
- Connecticut
- Maine
- Maryland
- New Jersey
- New Mexico
- New York
- Vermont
As you navigate the new year, taxes, and how changes will impact your business, our Corporate Capital team is here to help. We specialize in personal and corporate tax preparation services. We welcome you to reach out to us today. Call 855-371-0070 to connect with our experienced business management team in Las Vegas, Nevada, to learn how we can help your business thrive in 2022!