If you’re a California business owner, understanding the CalSavers Retirement Savings Program is essential to ensure compliance with state laws and provide a valuable benefit to your employees. CalSavers, a state-mandated retirement savings program, is designed to help employees save for retirement, particularly those working in businesses that don’t currently offer retirement plans. For businesses of all sizes, it’s critical to understand the key deadlines and how CalSavers impacts your responsibilities.
What is CalSavers?
CalSavers was created to provide millions of California workers with access to retirement savings options through a Roth IRA that is managed by the state. Employers who don’t already offer a retirement plan are required to facilitate employee enrollment in CalSavers, where employees contribute through payroll deductions. Employers have no financial obligation to contribute to the accounts, but they are responsible for facilitating the program.
Key Deadlines for CalSavers Compliance
CalSavers rolled out in phases, with deadlines based on employer size. The initial compliance dates have passed, but a new requirement extends CalSavers to even the smallest employers:
- September 30, 2020 – Employers with 100+ employees were required to register.
- June 30, 2021 – Employers with 50-99 employees were required to register.
- June 30, 2022 – Employers with 5-49 employees had to comply.
- January 1, 2025 – Employers with 1-4 employees will need to register.
For employers with fewer than five employees, the new deadline to register with CalSavers is December 31, 2025. This expansion marks a significant step toward ensuring retirement savings options for nearly all California employees.
Consequences of Non-Compliance
Failure to register for CalSavers can lead to penalties issued by the California Franchise Tax Board. After 90 days of receiving a non-compliance notice, businesses may incur a $250 fine per eligible employee. If non-compliance continues past 180 days, the penalty increases to $500 per eligible employee. Registering on time will help your business avoid these fines and keep you in good standing with state requirements.
Why CalSavers and What It Offers
CalSavers provides a practical solution for employers who don’t have a retirement plan in place, without the administrative and financial burdens of a traditional employer-sponsored retirement plan. For businesses considering a more comprehensive plan, however, alternatives like a 401(k) may be worth exploring. Here’s what CalSavers offers:
- For Employers: A streamlined way to offer a retirement benefit without the management responsibilities or contributions required of traditional plans.
- For Employees: Access to a Roth IRA, tax benefits, and a convenient way to save for their future.
How to Register with CalSavers
Registration with CalSavers is straightforward:
- Visit the CalSavers website to set up an account.
- Provide essential information, including your Federal Employer Identification Number (FEIN) and California Payroll Tax Number.
- Once registered, upload employee information to facilitate enrollment.
Employees are automatically enrolled at a default contribution rate of 5% but can adjust their contribution level or opt out entirely. Employers facilitate payroll deductions but are not responsible for account management or matching contributions.
Final Thoughts: Preparing for the 2025 Expansion
The 2025 expansion of CalSavers to businesses with 1-4 employees reflects California’s commitment to retirement savings access for all. Staying compliant by registering your business by December 31, 2025, will help you avoid penalties and demonstrate your commitment to your employees’ financial futures.
For many, CalSavers represents an easy way to provide a retirement option without the costs of a traditional plan. Whether you’re approaching the 2025 deadline or re-evaluating your current retirement offerings, CalSavers offers a valuable option that aligns with California’s legal requirements and ensures your business is future-ready.
