California Gives Green Light to State-Sponsored Retirement Plan

dollar-1362244_640On August 31st California passed a bill that would require certain private employers to arrange for automatic payroll deposits into employee retirement savings accounts.

If the bill is signed by Gov. Jerry Brown, covered employees would be automatically enrolled and would have the right to opt out of the program.  The program would apply to employers with more than five employees and do not have another retirement plan as an option.

Implementation, which would happen in phases, could begin as early as January 2017 if signed by Gov. Brown.  Within 12 months of the program beginning for enrollment, employers with 100+ employees and no retirement savings plan must automatically enroll their employees who do not opt out.  Employers with 50-99 employees would have two years to enroll, and employers with 5-49 employees would have three years.

Those who support the bill believe that people are 15 times more likely to save for retirement if their workplaces offers a savings program.  The development of a multitude of state-sponsored retirement programs could create additional work for HR Professionals: enrollment, withholding, and transmittals.  It may also become crucial for the HR professional to show that an employee was provided enough information to make an informed decision about whether to opt out of the program.

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