Name: jeff kuzmich - Migrate_CA_Retirement_Deadline_09102025_5045188
Uploaded: 2026-02-26T05:53:23.218Z
Duration: 31 min 20 s
Description: jeff kuzmich - Migrate_CA_Retirement_Deadline_09102025_5045188

Transcript for "jeff kuzmich - Migrate_CA_Retirement_Deadline_09102025_5045188": And thank you for joining us for today's presentation, California Retirement Deadline, a five Step Plan for Small Businesses. My name is Stephanie Schifano, and I'll be moderating today's session. Before we begin, just a few housekeeping notes. First, please note that the primary audio connection for today's session is streaming via your computer. Be sure to check your speaker volume to ensure your listening device is turned on and volume is at an audible level. To refresh or reload your webinar browser, on a PC you can press the F5 key, or on a Mac you can press Command R. Our webinar console also allows you to customize your view by enlarging or reducing the size of the slides in the media player using the tools at the top of each window. Let's take a closer look at some other important features. 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And now I'd like to introduce you to today's speakers. With us we have Zach Keep and Alex Valdez. Zach has more than fifteen years of experience in the retirement plan compliance industry. He's familiar with the particulars of ERISA and non ERISA four zero one ks, four zero three, and five excuse me, four fifty seven plans. And he holds a QKA designation from the ASPPA as a retirement compliance manager oh, excuse me, at the ASPPA. As a retirement compliance manager at Paychex, he works with a team of four retirement analysts, boosting a combined six decades of compliance experience. In addition, Zach manages a team of analysts who support the increasingly complex privacy, telephony, and AI compliance world. Alex has nineteen years in defined contribution plan sales and is an accredited retirement plan consultant. He currently serves as director of retirement plan sales for the Western US, including California, for paychecks. And now let me review today's agenda, and then we'll get this show rolling. So what you'll learn is an action plan for complying with the California State Retirement Savings Mandate. Then we're going to walk you through the steps of step one, understanding the law, step two, so you'll know your options, step three, comparing CalSavers IRA versus a four zero one ks, Step four, discovering what four zero one ks benefits are. And then step five, finding the right plan for your business. With that, I'm proud to hand it over to Zach to take us through the presentation. All right. Thank you so much, Stephanie. I think what I'm going to do in the interest of time is jump right into this because the situation in California is evolving and it's been evolving for a long time. Alex, when I turn it over to you, maybe you'll recall how many of these presentations you and I have done together. But, you know, the California mandate is nothing new, but I dare say it might be new to some of the folks on this call. The retirement mandate has been a very slow rolling boulder or maybe a slow moving avalanche in, one of the largest economy, the largest economy, pardon me, in the country. It started out initially applying only to the largest employers and like many other state plans, there was sort of a sort of a phased rollout. And over time, the mandate began to apply to progressively smaller and smaller employers until today, or maybe I should say in the not so distant future size no longer is going to matter for employers in the state of California. The deadline is almost upon us, gang. On 12/31/2025, just a few short months from when I record this today, the deadline is going to apply to businesses with between one and four employees. That is to say if there you are a one employee business, the California mandate will apply to you. So if you take nothing else away from this presentation today, know that the mandate is coming for the smallest business now. If you've heard our voice, if we've, if you've been on similar webinars in the past, it might not have applied to you. The odds are very, very good that it will apply to you today. So that is the most important takeaway, I think, if nothing else. But let's take a little bit of a step back, and let's talk about the background. Why was this law enacted? You know, California is far from alone. I think the last time I looked at a map, roughly 50% of the states in the union have some type of mandated retirement legislation, and many that don't are contemplating rolling something like that out. Why is that? Well, states and the nation as a whole, we all know there is a retirement crisis. You can hardly turn on the nightly news if anyone still watches the nightly news at this point besides myself. But, you will hear that retirement is a crisis. People do not have enough retirement savings. We also know that Social Security, is a kind of a question mark. At last check, there is discussion about Social Security funds being depleted or reduced at least by 2034. And we've all heard some dates probably that are a little bit sooner even than 2034. So we have a situation where millions of Americans have no retirement savings at all. And those who do might not have enough. And both parties are in a situation where they might or might not be able to rely on Social Security. So the states have kind of stepped in. They haven't stepped in alone, though, because the federal government has been busy as well. And we're gonna talk about sort of the intersectionality between some pretty interesting federal legislation and also what the states are doing. But for now, know that many states, notably California, have instituted a mandated retirement program. Like California, many of those states have had a staged rollout, where, again, starting with the applicability to the very largest employers and slowly working their way down, so the smallest employers have time to know that this is coming. And again, now it's here. So that leads us to the next big question. We at Paychex get this all the time, especially as some of those smaller employers are looking at, gee, you know, now is the time to take action. There's a couple of paths available, but you're going to need to take action. That leads to the inevitable question. Well, gee, what if we don't do this? Are there penalties associated? Well, I can answer that in large bold print with an exclamation point. Yes. There are absolutely penalties that the state of California will impose for failure to comply by the December. For the first ninety days, if you're ninety days or more out of compliance, you are looking at $250 per employee. For more than one hundred and eighty days, if you let this go a little bit longer, the pain becomes just a bit more acute. And that is going to be $500 per employee. And that's if you have kind of let this slide for one hundred and eighty or more days. So any employer, I think, to whom this mandate applies would absolutely be very well served by taking action and taking action today. So the next step is to decide, well, how are you going to take action? Because any employer, even the very smallest, maybe these days, especially the very smallest, have a couple of options before them. Let's take a look at what those options are. We're actually going to start with the middle one. Register for an exemption. This is a retirement mandate, but there are specific carve outs that, as the name implies, they exempt you from needing to offer a retirement plan. Now, spoiler alert, we'll go through all of these in a separate slide in just a moment. There are not many exemptions and they may not apply to many of the folks on the, presentation today. So if you apply for an exemption, great. Should it be what you depend on? I'll be honest and say no, probably not. The next option is to sign up for the CalSavers IRA. We're going to look at that option in detail in just a moment as well, but that will obviously satisfy the mandate. You will satisfy what California wants you to do by opting into the California plan. Then there's a third option, and I think this is maybe the most interesting, and that's to establish a qualified retirement plan, such as a four zero one retirement plan. As I've had the opportunity to speak with folks at the state level, including some of the pioneers of these state programs in states like Maryland, one of the intentions of the state mandate was yes, to provide that sort of bare minimum floor of a retirement plan. Certainly something is better than nothing, but sort of the unwritten intent in many cases was actually to drive small businesses to establish a four zero one k plan because there are some pretty significant advantages to that. So we're gonna look at that as well, and my colleague Alex is gonna go into a lot more detail on that. So, let's start with sign up for CaleSavers. That will absolutely get you a retirement plan. It will absolutely satisfy the mandate. It's gonna be a basic automatic enrollment, Roth IRA. So, that's gonna be using, post tax dollars going into an IRA plan. Again, that deadline is going to be the December. The last day of the year is the deadline. And, as we look at what's going to be involved with CalSavers, gang, you want to know that it's not as simple as signing on a dotted line. There is waiting period. There's some work to do. But for now, CalSavers is going to be for all intents and purposes, an IRA state sponsored. And that is that sort of the, the Chevy pickup retirement plan. It's gonna get you where you're going, and it is relatively simple, but it also is gonna lack a lot of the bells and whistles available with some of the other options. So, we'll move on to the next option. That's registering for an exemption. If you are a business who already has a qualified retirement plan, such as a four zero one ks incidentally, you do not need to offer a CaleSavers plan. You have satisfied the mandate by offering another type of retirement plan. So if you're in the audience today and you offer a four zero one ks to your employees, congratulations, you have satisfied the mandate. Obviously, if you've closed, sold the company, if you're no longer the business owner, you do not need to comply with the mandate. If you're a sole proper self employed, or if you're a government or religious tribal organization, there is no mandate for you. As you can see, this is a relatively small slice. Most of the small businesses out there, if they don't already offer a plan, they are going to need to comply with the California mandate. So option one, we just talked about. Option two is that unlikely exemption. Option three is going to be to establish a qualified four zero one ks plan. This satisfies the mandate automatically. Again, if you have one today, the mandate is satisfied. If you establish one by the deadline, the mandate once again is satisfied. And that four zero one ks plan is going to need to be administered by a professional provider. Obviously, I think any small business as a compliance person, any small business would be well served by turning to a professional. Four zero one ks's have, some complexities to them, but the good news with that in today's world, and here's where the federal government comes back in, as states have sought to drive plan establishment through mandates and IRAs, the federal government has sought to incentivize four zero one ks establishment through tax credits. And there are right now some very significant, very lucrative tax credits that can offset or at least substantially offset planned startup costs for a small business. So a business as they're contemplating that IRA route versus four zero one k route, they are going to be very well served, I think, by looking at how much is a four zero one k going to cost us once we account for those tax credits. And we'll maybe provide a couple illustrations as we go, but for now, know that four zero one ks does not need to be more complex and it does not need to be more expensive in many cases than those state mandates. And it's also important to know that there are pros and cons to a four zero one k versus an IRA. So, let's take a look at that next. What does a four zero one k give you? Well, on the far right, you'll see those tax credits. Thanks to the SECURE Act, it's a couple years old, but SECURE one point o and SECURE two point o really sought to offset plan establishment costs. In today's world, an employer can offset up to 100% of their plan startup costs. In in other words, you can not really pay. I I hesitate to phrase it that way, but the the cost hit for establishing a plan is very low. It's also important to know, if you decide to do profit sharing or an employer match, that middle box you'll see, there are tax credits for that as well. And it's also important to note that the contribution limit, the employee contribution limit for participants is a lot higher than an IRA, more than three times higher. Participants can save more, they can save faster, they can do it with more bells and whistles, they can have access to things like loans, hardship distributions, emergency expense distributions, that is more accessible for them. And it really is a tremendous benefit, I think, that can help you attract and retain high quality employees. A four zero one k is a much more fully featured retirement vehicle than an IRA. Those tax credits are available for a four zero one k. Of course, that four zero one k again is going to satisfy the mandate. So there are some, I think, some pretty significant advantages to that four zero one k route. So much so that states sought, again, to establish these mandates as the floor in hopes that employers would gravitate towards some of those more fully featured retirement vehicles. Now, let's take a quick look at what's involved for those of us who want to go the CalSavers route. I'm not going to go step by step through every, every piece of the procedure that you see outlined here, but note some of the time frames here. There's time frames to set up an account. There's access codes that you're going to need to get from KailSavers, and there's options for the employees to opt in, opt out, payroll deductions need to be established. And in the CalSavers world, the plan administrator, the employer, is going to be responsible for a lot of this. Not quite the case with the four zero one k, particularly if you're turning to a professional administrator. Even more so if you're opting into what's called a pooled employer plan, where the plan administrator, an entity like Paychex, would be able to handle a lot of that for you. So before I turn it over to Alex, I want to, just take one more look at the comparison. Four zero one k versus IRA, spell it out sort of in black and white here. You can see there is a massive difference in the contribution limits. Four zero one k is going to allow twenty three five versus only seven into an IRA. There are catch up contributions that are much more extensive. There are those tax credits. You can see some numbers there. Those do not exist in the IRA world. Employer matching contributions available at your discretion. If it's something you want to do, you can. You can take advantage of tax credits to offset some of those employer contributions as well. There are, options in both cases for employees to opt out, although in both cases, employees will also be automatically enrolled. And then another important note, I think, is there is a lot more choice in terms of the investments in four zero one k's. CalSavers, like any state plan, the state is choosing those investments. It's not to say they're bad investments, but the menu of investments is significantly larger in the four zero one k world. Also, last but not least, cost to employer. You know, there is an administrative cost to CalSavers. There are of course fees for four zero one k's depending on what kind of plan you want, whether you want a traditional plan or a pooled employer plan, what level of complexity you need. But again, keep in mind, those fees are in many cases gonna be offset by some of tax credits thanks to Secure two point zero. So, with that, I will turn it over to you Alex and why don't you kind of walk us through some more of the four zero one ks benefits out there. Alright, well Zach, thank you very much. Some amazing information that you shared with us there. So next I want to cover some of the benefits of offering a four zero one ks. Four zero one ks offers major credits and other benefits that IRAs do not. And one of those is the Secure Act tax credits. So with a new four zero one ks plan, you could qualify for tax credits and your employees win too. The Secure Act and the Secure Act two point zero provide tax advantages for qualified employers and participants. So the key benefits, could be a startup tax credit for establishing a new retirement plan up to $5,000, for each of the first three years that you offer the plan, an additional $500 tax credit for the first three years for the business owners when they implement automatic enrollment in their plan, and for businesses who choose to match a portion of their employees contributions or provide profit sharing contributions, a new tax credit of up to $1,000 per employee per year is available for each of the first five years. The employer contribution credit is generally a percentage of the amount contributed by the employer up to a thousand dollars per employee each year for the first five years. And this additional credit is limited to the employees with 50 or fewer employees and it's reduced for employers, with between fifty one and one hundred employees. These tax credits are not available for any business that has over a 100 employees or more. So one of the things, the other benefits of a four zero one is the ability, as Zach kind of alluded to, the ability to attract and retain high quality employees. So, you know, in a very competitive job environment right now, the ability to offer a high quality benefit is one of the most important things to be able to compete for talent that is out there. That is one of the most important reasons to offer a retirement plan. In addition, it helps business owners and businesses save on their business taxes. So by offering a contribution, helps reduce the taxes that a business has to pay. And it also helps you and your employees plan for the future. No one can predict the future, but you can prepare for it. And especially by offering a retirement plan like a four zero one ks that offers more, the ability to contribute more into the plan, you're going to put yourself in a better position to be able to save for your future and take advantage of that compounding interest as well. So we'll find a plan that fits your businesses. You know, today's 401ks are no longer just for big businesses. Within the family of 401ks, small businesses have many options. There are many plans that are designed to fit different budgets, the needs of even small businesses, and one of those is the pooled employer four zero one ks plan. So the pooled employer four zero one ks plan is often referred to as a PAP. This plan is tailor made for businesses that don't have a lot of time or staff to handle paperwork and administration. So here's how it works. Employers collectively participate in a four zero one ks plan that is professionally administered by a pooled plan provider or a P3, such as Paychex, sharing the plan reduces the daily administration and monitoring tasks that are typically required within a retirement plan. This is a great solution for businesses that need to be compliant with the state of California for instance, and the California state mandate, or if they want to offer more than what the CalSavers program brings to the table, or they don't have time or the staff to manage all the administration and the paperwork. Within the pooled employer four zero one ks, you also have many options, including payroll integration, safe harbor options, automatic enrollment, as well as being able to contribute on a pre tax basis and a post tax basis like Roth. So here, in addition, by offering a pulled employer plan or PEP, it really reduces the administrative tasks that are required to administrate a retirement plan. It also reduces your fiduciary liability. So, a fiduciary on a plan is anybody that is required to do what's in the best interest of a plan. If you're offering just a regular four zero one ks, not a pulled employer plan, you as the business owner become a fiduciary in the plan and are required to do what's in the best interest. By offering a pulled employer plan, you offload that fiduciary liability onto Paychex and Paychex becomes the fiduciary on the plan. Potentially reduced in administration costs as well, as well as plan trustee services. And you also qualify for those tax credits that we discussed under Secure Act and Secure Act two point zero. So which plan is right for you? So comparing a traditional four zero one versus a pooled employer plan. A traditional four zero one does give you a little bit more control of the options that are available in the plan versus comparing by offering a pooled employer plan, there's less administration fees and you're gaining the economies of scale by offering a retirement plan. So the costs associated with a traditional four zero one gives you more control, but it potentially has higher administration costs as compared to a PEP as well. In setting up a pulled employer plan, it's very, very easy. It reduces the setup responsibilities, including contracting with different vendors and the investment advisors, as opposed to setting up a traditional four zero one ks where you have to outsource and work with plan design, choosing investments and coordinating with all of the other vendors. The plan sponsor. So in terms of plan sponsor inside the PEP, Paychex or the P3 becomes the plan sponsor and the named fiduciary versus you as the business owner becoming the plan sponsor and the named fiduciary on the plan. And here's an exciting piece, is if you are required to do an audit, paychecks under a pulled employer plan would be responsible for the audit on the plan, potentially saving you tens of thousands of dollars, as opposed to having to do that yourself if you are required to offer, if you're required to have an audit on your plan. And then again, both of them do qualify for those Secure Act and Secure Act two point zero tax credits up to $16,500 for each of the first, in the first three years of the plan and up to a thousand dollars for each of the employees for the matching credit as well. So here are some, I want to take a quick moment and dispel some of the perceptions that many small businesses have about 401ks. The fact is more and more small businesses are adopting 401ks today, especially in light of the state mandates. But part of that is because of the Secure Act tax credits as well. They're also, they're making them very, very affordable. So the first myth that's out there is that plans are too expensive. Now with the SECURE Act tax credits and the potential to get up to $16,500 over the first three years and that matching tax credit, that kind of takes that off of the table there. One of the other myths is my company is too small to offer retirement plan. There are 401ks that are appropriate for every size businesses, whether you have one employee or hundreds of employees. Especially by offering a PEP, it's a great option for small and medium sized businesses. A lot of employees say, I just can't afford, I live paycheck to paycheck, I can't afford it. Well, that's one of the benefits of using, of taking, combining your four zero one ks with your payroll provider is if it comes out of your paycheck, you don't miss it. And especially if it comes out on a pre tax basis, there's not, you're less likely to miss it. You know, we all go to Starbucks and we spend, it used to be $5, I think it's now like $7 for the coffees, but you know, if we can afford a Starbucks, we can afford to save for retirement. No one ever gets to retirement age and says I have too much money. They get to retirement age and say I wish I would have saved more. The other myth is that a simple IRA is enough. The lower contribution rates and lifestyles that we have today, IRAs probably just aren't enough. The ability to contribute more inside of a four zero one ks is probably necessary for you and your employees to be able to meet your future needs for retirement. And then the last myth is it's just too complicated. Again, by engaging in like a PEP, the complexity is removed. We take care of all of the complexity and the administrative burdens that is required in offering a retirement plan. So with that, I hope, this has been valuable information. Stephanie, I'll turn it back over to you. Great, Alex, thank you so much. So at this time we have a quick poll question and it'll pop up separately on your screen. Please mark your response and click the submit button. If you would like to speak with a paycheck sales professional about adding retirement options for your business, you can answer that now. So as you know, Zach and Alex did an amazing job today. Love presenting with them. So what you've learned today is what the California Retirement Savings Mandate requires, what you need to do to comply, the difference between the IRAs and the 401s, and then which option could be best for your small business. What I'd like to do is remind you, and I think we started with Zach sharing this, but the California deadline for nonexempt employees with one to or excuse me, nonexempt businesses with one to four employees is 12/31/2025. And as you can see, you can also talk to an employment specialist here at, Paychex for additional information. Thank you again for joining us for today. As a reminder, you can find a printable version of today's deck in the file and resources area on the upper right hand side of your console. It should be the first resource listed in that window. If you need help to meet the mandate, don't hesitate to click the link on the blue card to request follow-up from one of our paychecks retirement specialists. You'll also find a wealth of additional multimedia tools and information at our retirement service resource hub when you follow the link on the gray button. As we close today's session, you'll see a short survey pop up, and we invite you to contribute feedback to help us ensure that our resources continue to meet your needs. If you can spare a few extra moments, please let us know what you think. Thank you again, and have a great day.