Question: Are California real estate agents required to offer their employees access to 401k plans?
Answer: Most brokers are not required to offer 401k plans to their employees. However, effective June 30, 2022, brokers with five or more employees must offer their employees 401,000 plans.
California employers are required to provide access to a retirement plan if they have five or more employees. [Calif. Government Code §100000(d)]
If the number of employees fluctuates, the requirement is based on the average number of people employed in the previous calendar year. [Calif. Code of Regulations §10001(a)]
But are real estate agents considered employees?
Brokers typically negotiate fee-sharing agreements with agents they employ, using an independent contractor (IC) agreement to document the employment. [See RPI Form 506]
Alternatively, brokers may choose other compensation and tax withholding arrangements documented by an employee agreement form. [See RPI Form 505]
Independent contractors do not count towards the agent’s five employee threshold. However, brokers with five or more regular employees (including part-time assistants and other unlicensed employees) must provide access to a retirement plan.
Does the agent need to provide access to a retirement plan?
Yes! This brokerage firm must provide access to a retirement plan simply by virtue of the presence of five or more regular (non-contract) employees.
The agents and broker associates employed by the broker under an IC agreement are eligible as individuals to participate in a retirement plan through the government-administered CalSavers program.
CalSaver plans
Employers can offer a plan through: To see also : Although examined, Health Insurance is already looking to expand Medicare benefits by 2023.
Eligible California employers who do not offer their own employer-sponsored retirement plan are required to register with CalSavers. This program was created by state legislation and provides small business employees with access to retirement plans, including automatic payroll deductions.
CalSavers offers a variety of investment options that are customizable based on each employee’s targeted retirement year. Based on their selection, each retirement plan includes investments in a mix of bonds, stocks, and other investment vehicles.
CalSavers does not charge employers any fees. However, employers must take the time to enroll their employees with CalSavers and facilitate the establishment of automatic payroll deductions.
An employer is exempt from registering with CalSavers if it already offers an eligible retirement plan that qualifies for favorable federal income tax treatment. This includes:
However, pending legislation may change the current requirement of five or more employees to employers with only a single employee. SB 1126 requires employers with one or more employees to offer a retirement plan or register with CalSavers.
However, SB 1126 does not propose changing the definition of employees to include IC employees like most real estate agents. In principle, firsttuesday supports the inclusion of IC employees in any future legislation requiring employers to provide retirement plans.
Editor’s Note – Stay up to date on SB 1126 and other pending legislation with the potential to affect your real estate practice on Tuesday’s first page for Legislative Gossip.
Saving for retirement without an employer
Even if their broker is exempt, sales representatives and broker associates can register with CalSavers as individuals—without the support of an employer.
To register, the person must: This may interest you : Netflix and ads are coming.
Employees pay an annual fee of 0.825% to 0.95% of their account balance annually. The credit is automatically deducted from the saver’s balance.
To begin the registration process, visit the CalSavers website.
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