The California Retirement Plan mandate is here, and it directly impacts small employers across the state. If you have one or more non-spouse employees and do not sponsor a qualified retirement plan, you must register for CalSavers or claim an exemption. For the smallest firms—those with 1 to 4 employees—the deadline to act is December 31, 2025.
What Changed in the California Retirement Plan Law
In 2022, California passed SB 1126, expanding the retirement mandate to include businesses with as few as one employee. This change ensures more workers gain access to retirement savings, but it also means even micro-employers must now make a decision: sign up for CalSavers or put a qualified plan in place. Importantly, owner-only businesses, including those where a spouse is also an owner, remain exempt.
Who Falls Under the California Retirement Plan Coverage?
Covered employers are those that averaged at least one California W-2 employee in the prior year and do not offer a qualified retirement plan. The average is based on the four quarterly DE-9/DE-9C filings submitted to the Employment Development Department. Out-of-state employers with California employees are also included.
Exemptions apply if you already sponsor a 401(k), 401(a), 403(a)/(b), SEP, SIMPLE, or a payroll-deduction IRA with automatic enrollment. Government, tribal, and religious organizations, along with owner-only firms and companies that use independent contractors exclusively, are also exempt.
Employer Operations and Timing
Employers must register or claim an exemption using their EIN, California payroll tax number, and CalSavers access code. Once registered, employers upload their roster and let CalSavers handle employee notifications.
A key operational note: because CalSavers has a 30-day decision window before deductions start, some short-term hires may never actually contribute before leaving the company. Employers should be aware of this when managing compliance.
Alternatives to the California Retirement Plan Mandate
Some businesses may decide that adopting their own qualified plan, such as a SEP, SIMPLE, or 401(k), is a better fit. This route satisfies the mandate while allowing flexibility on employer contributions, higher deferral limits, and custom plan features. However, this also means taking on costs and ERISA compliance responsibilities—so it’s a decision worth reviewing carefully.
Quick Compliance Checklist for 1–4 Employee Firms
- Decide: CalSavers or your own qualified retirement plan.
- Register or claim exemption by December 31, 2025.
The California Retirement Plan mandate is approaching quickly. Even if you only have one part-time worker, you can’t afford to ignore it. Unsure if your company is covered, or whether CalSavers or a private plan is the better choice? Call James D. Miller, CPA today—we’ll guide you through your options and keep your business compliant.