If you’re a small business owner in California, there’s an important deadline you can’t afford to ignore. By December 31, 2025, every employer with at least one W-2 employee AND no existing retirement plan must either register for CalSavers or provide a qualified retirement plan.
This is part of California’s effort to close the retirement savings gap and ensure more workers have access to retirement plans. But here’s the catch: miss the deadline, and your business could face hefty fines per employee.
Let’s break down what this law means, why it matters, and how you can take action now to protect your business, your employees, and your peace of mind.
Why This Matters
- Most Americans aren’t saving enough for retirement — and California is stepping in to change that.
- Missing the deadline could cost you $250–$500 per employee in fines.With already high cost of living, this can be very costly for small businesses.
- Beyond compliance, offering retirement benefits helps you attract and keep top talent.
Who Qualifies
If you’re an employer in California with:
- 1 to 4 employees, AND
- No existing qualified retirement plan (such as a 401(k), SIMPLE IRA, or SEP IRA),
then you fall under this mandate.
👉 Your deadline: December 31, 2025.
This follows earlier phases for larger businesses:
- Employers with 100+ employees were required to comply by September 2020.
- Employers with 5–49 employees had deadlines in 2022–2023.
**If you’re not sure where your business falls, check out additional resources below.
What Happens If You Don’t Comply
Failure to comply isn’t just a paperwork issue — it’s costly. According to Paychex, fines start at $250 per eligible employee if you don’t register or set up a plan within 90 days of notice. If you continue to ignore the mandate, penalties can increase to $500 per eligible employee (yikes).
For a business with just 5 employees, that’s a potential $2,500–$5,000 penalty. For a company with 20 employees, the fines could soar into the tens of thousands.
Remember, this is not just about avoiding fines. Not offering retirement benefits may also impact your ability to attract and retain top talent — something that matters deeply in today’s competitive hiring environment.
Your Options
You essentially have two paths forward before the deadline:
- Register with CalSavers
CalSavers is California’s state-run retirement savings program. It requires minimal employer involvement:
- Employees are automatically enrolled into a Roth IRA at a default 5% payroll contribution (they can change this amount).
- Contributions are made via payroll deductions.
- Employers don’t contribute funds; your only responsibility is to facilitate payroll deductions.
For many microbusinesses, this is the simplest route to compliance.
- Offer Your Own Qualified Retirement Plan
Instead of CalSavers, you can choose to offer a private retirement plan such as:
- 401(k) (Traditional or Roth)
- SIMPLE IRA
- SEP IRA
These plans may provide:
- Higher contribution limits (allowing owners and employees to save more).
- Employer contributions, which can help attract and retain staff.
- Potential tax advantages for both the business and employees.
- Customization that aligns with your company’s culture and growth strategy.
Additionally, small businesses may qualify for IRS tax credits to offset the costs of setting up and maintaining a retirement plan. These incentives can significantly reduce the burden of plan administration, making this option more accessible than many owners assume.
- A Potential Combo Option
Even if you have a qualified retirement plan offered currently that you can still enroll in the CalSavers program. You do not contribute to the CalSavers plan as the employer. The deductions to the Roth IRA under the CalSavers program is set-up for the employee as a payroll deduction. Your employee has the option to opt out of the CalSavers program – see the additional resource links below.
Why Acting Now Matters
Waiting until the last minute isn’t worth the risk. By planning ahead, you:
- Avoid fines and compliance headaches.
- Give your employees peace of mind with retirement savings access.
- Leverage tax credits that can make private plans more cost-effective.
- Position your business competitively when hiring and retaining talent.
Steps to Get Started
- Assess your current situation.Do you already have a retirement plan in place? If not, you’ll need to decide between CalSavers or a private plan.
- Talk to your payroll provider.Many providers now integrate directly with CalSavers, making setup easier.
- Explore plan options.If you’re considering a 401(k) or IRA plan, review the costs, tax credits, and benefits with your tax professional and financial advisor.
- Communicate with employees.Keep your team informed about upcoming changes and how they’ll benefit.
- Get additional support (this is where we come in!).At Modern Wealth Collective®, we specialize in helping small business owners design financial strategies that align with their values and vision. We can help you evaluate whether CalSavers or a private plan is the best fit for your goals.
Key Resources
CalSavers Official Employer Portal
CalSavers Employee Information
IRS – Retirement Plans Startup Costs Tax Credit
Final Thoughts
Retirement savings shouldn’t be an after-thought for you or your employees. With the December 31, 2025 deadline, California small business owners need to take action now to stay compliant, avoid penalties, and empower their teams.
👉 Ready to explore your best option? Schedule a Discovery Call with us today and let’s design the strategy that keeps your business compliant and your team’s future secure. Book here: https://www.modernwealthcollective.com/schedule-a-meeting