California requires all employers in the state to register their business, or register their exempt status, with the CalSavers Retirement Savings Program, the state-mandated employee retirement savings program. The CalSavers Retirement Savings Program was created by state law to ensure all California workers can save for retirement through automatic payroll contributions facilitated from their workplace. Information on the program can be found here: https://www.calsavers.com/.
The deadline for employers with 5 or more employees has passed in prior years, but the deadline for small employers with 1-4 employees is December 31, 2025. Businesses with no employees are not subject to the mandate. However, even one employee, including the owner, will trigger the requirement to register with CalSavers, including if only to report exempt status.
Available Exemptions
Employers will register as exempt if (a) they already provide a 401(k) or similar qualifying retirement plan for their employees, (b) the business has been closed, (c) the business has no employees other than the owner, or (d) the business is a government entity or religious or tribal organization.
Contributions and Limits
If an employer is not exempt, then the business will need to participate in the CalSavers program, which means allowing employees to voluntarily have money deducted through payroll and deposited in a Roth IRA under the CalSavers program. Employees eligible to contribute to the CalSavers Roth IRA are subject to the federal Roth IRA income limits, which currently restrict contributions to those making less than $165,000 per year as a single filer, or less than $246,000 as a married filer filing jointly. Even if an employee earns too much to contribute to a Roth IRA, they must still be registered with CalSavers to satisfy the employer’s compliance requirements.
Employer Requirements and Pathways to Compliance
Employers may comply by enrolling in CalSavers and facilitating payroll deductions, or by establishing their own qualified retirement plan, such as a 401(k), SIMPLE IRA, SEP IRA, profit-sharing plan, or pooled employer plan, and registering their exempt status.
Areas Where Applicability May Be Less Straightforward
While the requirement appears clear on its face, applicability can be more nuanced for businesses operating through multiple related entities, shared ownership structures, or arrangements involving leased, shared, or remote employees. This includes situations where workers are placed through third-party staffing firms or where employees divide their time across affiliated entities. In some cases, the mandate may apply even when a business has only one eligible California-based employee, provided no qualified retirement plan is offered and other criteria are met. Businesses utilizing professional employer organizations (PEOs), co-employment models, or common-paymaster arrangements should verify which legal entity is responsible for satisfying enrollment or exemption requirements to avoid inadvertent non-compliance.
Relevance in Mergers, Acquisitions, and Corporate Transitions
For companies involved in mergers, acquisitions, or other business transitions, California’s retirement savings requirement is one more item on the legal compliance checklist. Buyers should confirm whether any required enrollment or exemption filings were completed, whether supporting documentation has been retained, and whether any potential penalty exposure exists, as fines may be assessed on a per-employee basis after state notice periods.
Questions About Applicability or Transaction Implications?
Our firm assists business owners, investors, and transaction stakeholders in evaluating entity structure and related compliance considerations in connection with corporate planning, due diligence, and deal execution, including compliance with benefits requirements such as the CalSavers program. To discuss applicability of the California retirement program mandate in the context of your business or an upcoming transaction, contact our office at (714) 619-9360.