Workers at architecture firm and general contractor Walker Workshop have planned and built high-end homes from Long Island to the Hollywood Hills. But planning for retirement and building savings is another story.
Like many small business, the 16-employee Los Angeles company doesn't offer a pension or 401(k) plan. Starting in January, though, workers there and at a handful of other companies will be able to start putting money away in state-sponsored retirement accounts.
They'll be early participants in CalSavers, a program that — if it overcomes a federal court challenge — could soon offer basic retirement savings accounts to millions of California workers.
Walker Workshop and about 20 other companies are signing up this week to be part of a pilot for the program, which will open to all employers in July. By 2022, state law will require California companies with as few as five employees to either sign up for CalSavers or offer their own retirement savings plans.
DeAnna DeLisle, Walker Workshop's accounting director and office manager, said "we looked at some retirement options, but they were too expensive or too complicated to administer."
CalSavers, though, is free for employers. All they have to do is help workers enroll and deduct money from their paychecks. The program is overseen by a state board and accounts are managed by Boston firm State Street Global Advisors.
But legal questions persist, especially when it comes to automatic enrollment.
The anti-tax group Howard Jarvis Taxpayers Assn. sued California Treasurer John Chiang's office over CalSavers in May, arguing that the program amounts to an employer-sponsored retirement plan.
The program was designed to offer an easy path to retirement savings for the estimated 7.5 million California workers who don't have a retirement plan through work. Workers who don't have access to employer-sponsored plans can start retirement savings accounts on their own, though few actually do so.
CalSavers is not a pension program. Rather, it's a state program that offers individual retirement accounts to workers. The accounts are not guaranteed by the state and investors may lose money.
By default, when workers enroll, they'll contribute 5 percent of their earnings to their CalSavers accounts. A worker's first $1,000 in contributions will be invested in a money-market fund with the rest invested in a target-date fund, which holds different mixes of stocks, bonds and other investments that vary based on the expected retirement date.
CalSavers account holders can choose from a menu of investment options, including a money-market fund, a bond fund, two stock funds and several target-date funds.
The legality of the program at first seemed secure. In 2016, the federal Department of Labor, which oversees employee retirement plans, issued a new rule saying that state-sponsored retirement savings programs would be exempt from federal retirement savings laws.
But last year, Republicans in Congress voted to scrap the new rule.
But Katie Selenski, executive director of the CalSavers program, said the Labor Department rule "was for the chambers of commerce to help them feel more confident that employers would not be subject to those rules."