Running a small business in California comes with its own set of challenges, from managing administrative tasks to attracting and keeping talented employees. But what if we told you there is a way to offer a valuable retirement benefit that can help you on both fronts, without the traditional complexities?
CalSavers is your friend who makes you an attractive employer and protects your employees’ future.
What is CalSavers?
CalSavers is a retirement savings program created by the State of California. Its core purpose is to provide a convenient way for employees whose employers do not offer a retirement plan to save for their future. Think of it as a facilitated pathway to retirement savings.
Importance of CalSavers for a Small Business
The answer to “We’re a small team. Do we really need to think about this?” is YES!
It doesn’t only give you an advantage with talent attraction, it is required in California, so this option saves you from penalties for not compiling. If you are a business with one to four employees and are not offering a qualified retirement plan, you need to register your business and employee details by December 31, 2025. Failing to register before the deadline will result in $250 as a penalty for non-compliance, and the number will increase after every forthcoming due date.
Benefits of CalSavers
- Attract and Retain Top Talent: Employees value the employers who pay importance to their future and stay with them.
- Gain a Competitive Edge: Even if you can’t offer a fully sponsored 401(k), providing access to CalSavers helps you level the playing field with larger companies that typically offer retirement benefits.
- Simplified Implementation and Minimal Administration: Retirement plans are an administrative burden for small businesses. But not with CalSavers. Your role is just to register and facilitate payroll deduction.
- Reduced Liability: Employers using CalSavers do not take on fiduciary responsibility for the program or investment decisions, mitigating potential legal and financial risks.
How CalSavers Works for Employees
- Automatic Enrollment (with Opt-Out): When you register, eligible employees are automatically enrolled in the program, making it easy for them to start saving. However, they always have the choice to opt out if they prefer.
- Convenient Payroll Deductions: Contributions are automatically deducted from their paychecks, making saving effortless.
- Flexible Contribution Options: While there’s a default contribution rate of 5% of gross pay, employees can easily adjust their contribution amount to fit their individual financial goals.
- Investment Choices: Employees have access to a range of investment options within the CalSavers program, allowing them to choose a strategy that aligns with their risk tolerance and time horizon.
CalSavers Vs. Traditional Retirement Plan
| Feature | CalSavers | Traditional 401(k) Plan |
| Employer Role | Facilitate payroll deductions, remit funds | Plan sponsor, administrative responsibilities |
| Administrative Burden | Low | Higher + Fees |
| Employer Contribution | Not required | Optional |
| Fiduciary Liability | None | Employer typically has fiduciary duties |
| Cost to Employer | None | Administrative fees, potential matching funds |
Quick Points for Small Businesses
Here are some important points for you as a small business owner to keep in mind:
- Your main roles include registering with CalSavers, setting up payroll deductions for participating employees, and remitting those contributions to the program.
- Starting in 2025, businesses with more than one employee in California are required to either offer their own qualified retirement plan or participate in CalSavers.
- The deadline to register in CalSavers for less than 4 employee organizations is December 31, 2025.
- There are no employer contributions or program fees associated with CalSavers.
If you are looking for a PEO partner for your small business, contact 3G’s!
Calsavers can make the future of your employees secure while attracting talent for your business. Why are you waiting for the deadline and penalties? Register your business in CalSavers today!