CalSavers Requirements – Fully Effective 12/31/2025

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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Financial Planning offered through Reason Financial, a state Registered Investment Advisor. Investment advice offered through Merit Financial Group, LLC an SEC Registered Investment Advisor. Merit Financial Group and Reason Financial are separate entities. Tax related services offered through Reason Tax Group. Reason Tax Group is a separate legal entity and not affiliated with Merit Financial Group, LLC. Sean P. Storck CA Insurance Lic#OF25995 and Steven W. Pollock CA Insurance Lic#OE98073

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