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CalSavers Requirements – Fully Effective 12/31/2025

5 hours ago

CalSavers Requirements

California now requires all employers with at least one employee to offer a retirement savings plan. This mandate is fully phased in by December 31, 2025. Below is a summary of next steps:

Who Must Comply by 12/31/25?

  • Any California employer with 1 or more employees
  • Applies even if employees are part-time or short-term
  • Does not apply to:
    • Sole proprietors with no employees
    • Self-employed individuals with no employees
    • Certain religious organizations

What Employers Must Do

To comply with the law, employers must either:

  1. Enroll in the state-run CalSavers program, OR
  2. Offer their own qualified retirement plan, such as:
    • 401(k)
    • SIMPLE IRA
    • SEP IRA

Penalties for Noncompliance

  • $250 per eligible employee for initial noncompliance
  • $500 per eligible employee for continued noncompliance

NEW Options to Make Compliance Easier

Option 1 — Use CalSavers

  • Whether you use CalSavers or not, you will need to either Register or Exempt your business if you are a qualifying employer. You can find the link to CalSavers here.
  • Employees are automatically enrolled at 5% of their gross wage. Employees are given a 30-day period where they can choose to opt out. If all employees opt out of funding, no further action is required.
  • All employee contributions are after-tax contributions and they are limited to $7,000 ($8,000 if age 50 or older) per calendar year.
    • Note that individuals with Roth IRA or Traditional IRA contributions outside of their CalSavers account are limited to the overall contribution amount of $7,000 in the calendar year.

Option 2 — ADP “Starter-K” Plan (NEW for 2025)

If your business runs payroll through ADP, they now offer a simple Starter-K plan that satisfies the CalSavers mandate.

Features:

  • Flat $100 per month cost
  • Payroll-integrated contributions
  • Satisfies CalSavers requirements at lower cost than more traditional employer plan
  • Employees are automatically enrolled at 3% of their gross wage

Option 3 — SIMPLE IRA or SEP IRA

  • Low administrative cost
  • Easy payroll integration
  • Meets the CalSavers mandate

Option 4 — Full-Service 401(k) or Safe Harbor 401(k)

Best for employers seeking:

  • Higher contribution limits
  • Employer match options
  • Stronger tax-planning benefits for owners

We can help you choose the best option for your business ahead of the 12/31/25 deadline.

 

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