That’s because participants auto-enrolled in CalSavers will start off paying nearly 1% in fees on their accounts. The majority of the fee will be paid to Ascensus for administration of the program. Its initial fee is 75 basis points, which will gradually be reduced to 15 basis points if CalSavers is able to cross a threshold of $35 billion in assets.

The state adds on an administrative fee of 5 basis points, with State Street Global's fund fees ranging from 2.5 to 12 basis points. The plans investment options are four funds run by State Street Global Advisors, with an ESG fund available from Newton Investment Management.

As the phase-in for CalSavers continues into 2022, business owners will become aware that they need to make a decision about offering a retirement plan or the decision will be made for them, advisors said. While CalSavers might be good for some, many will prefer a private option. This could be a lead-generating opportunity for advisors to have a conversation with business owners to offer up their services.

For small- and medium-sized businesses without retirement plans, 52% of those employers surveyed would rather start their own retirement plan than use a state-sponsored offering if asked to choose between the two, according to Pew data from 2017.

Top Of Form

Aaron Schumm, CEO and founder of the digital retirement platform Vestwell, said advisors have an opportunity to highlight the benefits and potential cost-savings of their services for employers and participants who are being mandated into retirement savings.

“If you're an advisor and you see a company signing up for this state-mandated IRA program, it could be an interesting opportunity to have a dialogue with those companies,” he said. He suggested digging into what is behind the decision to use a state-mandated program, to ensure employers are doing what's in the best interest of employees.”

"This is great for the employee, but the employer may have more burden than they are prepared for," said Shan Sutherland, a wealth advisor at Simple Impact LLC in Calabasas, Calif.

"The employer is responsible for providing employee information, setting up payroll deductions, and keeping a record of employee contributions," continues Sutherland, "one problem is, many small employers are not prepared with the knowledge or time to respond to this upcoming requirement.

"Choosing a [private] 401(k)-retirement plan is the chance for employers to show their employees they care," Sutherland said.