Business owners in California must understand their responsibilities under the CalSavers Retirement Savings Program. While the program is designed to help workers save for the future, it also places specific requirements on employers.
Failing to comply can lead to penalties, so let us take a closer look at what you need to know to stay on the right track.
What Is CalSavers?
CalSavers is a retirement savings initiative created by the state of California to provide access to Roth IRAs for workers whose employers do not offer a retirement plan. Contributions are made through automatic payroll deductions, and employees are enrolled by default unless they opt out.
Which Employers Are Affected?
Any California business with five or more employees and no employer-sponsored retirement plan is required to either:
- Offer a qualified retirement plan such as a 401(k), SIMPLE IRA, or SEP IRA
- Register for CalSavers and facilitate employee participation
California expanded the CalSavers mandate in 2022 to cover employers with at least one employee. Those with up to four employees must comply by registering or certifying an exemption by the end of 2025, with early notifications beginning in February of that year.
All eligible employers must comply, regardless of industry or whether their workers are part-time or full-time.
Key Employer Responsibilities
Register or Certify Exemption
If you do not offer a retirement plan, you must register with CalSavers. If you do offer a plan, you still need to certify your exemption on the CalSavers portal.
Provide Employee Information
Once registered, you are required to upload information for eligible employees, including their names, Social Security numbers, and contact details. This must be done within 30 days of registration.
Facilitate Payroll Deductions
You must set up payroll deductions and remit employee contributions to CalSavers. The default rate is 5 percent of pay, with automatic annual increases unless the employee changes their settings.
Maintain Ongoing Compliance
You must keep your employee list up to date, add new hires as they become eligible, and make timely payroll contributions. There is also a requirement to ensure that employees are informed of their right to opt out or change contribution levels.
Avoid Penalties
Failure to comply with the program can result in financial penalties. The state may impose a fine of $250 per eligible employee if you do not register within 90 days of receiving a notice. This penalty increases if noncompliance continues.
Important Timelines
Deadlines have already passed for larger employers. Small businesses with five or more employees were required to register by June 30, 2022. Those with one to four employees must register or file an exemption by the end of December, 2025. However, the state continues to identify and notify businesses that have not yet taken action.
Should You Consider Offering Your Own Plan Instead?
While CalSavers is a convenient option, it is limited in scope. If you want greater control over retirement plan features, contribution limits, or tax advantages, you may want to explore private plan alternatives. Offering your own plan could also be a valuable tool for attracting and retaining employees.
Take Action Now
Complying with CalSavers is not optional. Whether you choose to register for the program or offer a private plan, acting now ensures that your business avoids penalties and supports your employees’ financial futures.
If you are unsure about your responsibilities under CalSavers or want to explore retirement plan alternatives, contact us to discuss your questions and concerns. We will help you understand your options and choose the best path forward for your business.