California cannabis companies not exempt from retirement plan mandate
Large companies face impending deadline to roll out retirement plans.
Large cannabis companies in California have two weeks to implement a retirement plan for their workers or enroll in the state’s CalSavers plan, CannaBizCentral reported in September. Failure to do so could have employers facing up to $750 per employee in penalties, according to Jewell Lim Esposito, a partner FisherBroyles, LLP.
Related: COVID-19 forces CalSavers to delay employer registration deadline
Under California’s retirement plan mandate, any business employing more than five workers is required to offer a retirement plan. Those that don’t are eligible to participate in the CalSavers program. Companies that employ more than 50 workers have until June 30, 2021, to implement a plan, while smaller companies have until 2022.
It’s down to the wire for the largest companies, though: Sept. 30 is the new deadline since the coronavirus delayed the first wave of enrollments.
Marijuana’s hazy legal status doesn’t let cannabis companies off the hook. Esposito wrote that it’s clear from the text of the law that cannabis companies are not exempt — either offer a retirement plan, or register for the CalSavers IRA program.
Related: What employers need to know about the U.S.’s evolving marijuana laws
Esposito noted that cannabis companies enrolled in the state program won’t be able to offer employer matches on workers’ contributions, or offer any profit sharing arrangements. Those limitations don’t exist for employers that offer more traditional plans outside the state program.
She added that 401(k)s are a “good retirement plan choice for cannabis companies trying to comply with California’s mandate,” with the added bonus that they’re well-recognized by consumers.
“A 401(k) plan allows a cannabis company input in designing the terms of the plan (eligibility, age of participating, length of minimum service, vesting, employer contributions, etc.),” she wrote.
Esposito wrote that the Internal Revenue Code and the Employee Retirement Income Security Act recognize cannabis companies as eligible to sponsor employee retirement plans. In fact, the SECURE Act even offers benefits for doing so.
“Under the SECURE ACT, any company — including a cannabis company — can get up to $5,000 annually in a federal tax credit in starting or participating in a new 401(k) plan. Moreover, if the 401(k) plan has an automatic enrollment feature (where employees are put right into the 401(k) plan, unless and until they opt out), then there is another $500 annual federal tax credit,” she wrote.
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