California Employers Must Provide Retirement Plan Access

 

California Employers Must Provide Retirement Plan Access

As of December 31, 2025, all California employers with at least one employee must either offer their employees a qualified retirement plan or enroll their employees in the state-sponsored CalSavers program.

All private-sector employers in California who have at least one W-2 employee and do not offer a qualified retirement plan must comply. The rollout was phased by employer size over several years:

Businesses with 1–4 employees: Must register or certify their exemption by December 31, 2025.

Businesses with 5 or more employees: The deadline was June 30, 2022. Businesses that have not complied are now subject to penalties.

What is CalSavers?

CalSavers is a state-sponsored retirement savings program designed for workers whose employers do not offer a qualified retirement plan, such as a 401(k) or SEP IRA. The program provides employees with an easy, automatic way to contribute to an Individual Retirement Account (IRA) directly from their paycheck.

The program was established to close the retirement savings gap in California, where many workers—especially those at small and mid-sized businesses—have historically lacked access to employer-sponsored retirement plans.

Employer Responsibilities

California law requires that employers with five or more employees take one of two actions:

1. Offer a Qualified Retirement Plan
   Employers may choose to establish a private retirement plan, such as a 401(k), 403(b), SIMPLE IRA, or SEP IRA. Doing so satisfies the state requirement, and those businesses are not required to participate in CalSavers.
2. Register with CalSavers
   If a company does not sponsor its own retirement plan, it must register with CalSavers and facilitate employee participation. This involves uploading employee information to the CalSavers portal and ensuring payroll deductions are processed each pay period. Importantly, employers do not contribute to the program or manage investment options; their role is limited to facilitating payroll deductions.

Key Features of CalSavers

• Automatic Enrollment: Eligible employees are automatically enrolled at a default contribution rate (currently 5% of gross pay) unless they opt out or select a different rate.
• Portability: Accounts are owned by the employees, so savings remain with them even if they change jobs.
• No Employer Fees: Employers are not charged to participate in the program.
• Investment Options: Employees choose from a menu of professionally managed investment funds.

Compliance Deadlines and Penalties

Employers who fail to comply with the law may face financial penalties. The state can assess fines for each eligible employee if an employer does not provide a retirement plan or register with CalSavers within the required time frame.

Benefits for Employers and Employees

For employers, CalSavers offers a simple way to meet the state’s legal requirements without the administrative complexity of managing a private retirement plan. For employees, the program provides a convenient path to saving for retirement, helping to build long-term financial security.

More information is available at the California EDD website

Final Thoughts

If you are an employer in California, it is critical to act now to ensure compliance. Review your current retirement plan offerings—or, if you do not yet have one, register your business with CalSavers. By taking these steps, you not only meet your legal obligations but also empower your employees to take charge of their financial future.

Eric D. Morton is the principal attorney at Clear Sky Law Group, P.C. He can be reached at 760-722-6582, 510-556-0367, or emorton@clearskylaw.com