As a business owner, staying compliant with evolving employee benefits regulations is essential. In recent years, both the state of California and the federal government have implemented mandates that require certain employers to offer retirement savings plans, either through a state-sponsored program or a private 401(k).
The California Mandate: CalSavers
California’s CalSavers Retirement Savings Program is a state-run initiative aimed at increasing access to retirement savings for workers whose employers do not offer a retirement plan. The program requires most employers to either provide a qualified retirement plan (such as a 401(k)) or register for CalSavers.
Who is Subject to CalSavers?
As of June 30, 2022, the mandate applies to all California employers with 5 or more employees, including full-time and part-time workers, if they do not offer a qualified retirement plan.
Employer Responsibilities
- Register for CalSavers or certify exemption if you already offer a qualified plan.
- Facilitate employee enrollment by submitting employee information.
- Deduct and remit contributions via payroll.
- Stay compliant with deadlines to avoid penalties, up to $750 per employee for noncompliance.
Employers are not required to contribute to employee accounts under CalSavers, but they must facilitate payroll deductions and maintain accurate records.
The Federal Mandate: SECURE Act 2.0
Signed into law in late 2022, the SECURE Act 2.0 introduced sweeping changes to employer-sponsored retirement plans. While not a “mandate” in the same sense as CalSavers, it effectively requires many new plans, established after December 29, 2022, to include automatic enrollment features.
Key Provisions That Affect Employers
Most new 401(k) and 403(b) plans must automatically enroll eligible employees at a contribution rate of at least 3%, unless the employee opts out. Contributions must automatically escalate annually up to at least 10%, but no more than 15%.
Certain Businesses Are Exempt
Businesses are exempt from this auto-enrollment requirement if they:
- Are new businesses (less than 3 years old)
- Have 10 or fewer employees
- Are governmental or church plans
- Established their retirement plan before December 29, 2022
Tax Incentives for Small Businesses
To encourage plan adoption, SECURE 2.0 offers expanded tax credits:
- Up to 100% of administrative costs for plans started by businesses with 50 or fewer employees
- Additional credits based on employer contributions for eligible employees
What Business Owners Need to Do
To stay compliant and maximize benefits, follow the steps below.
1. Determine Your Status
Do you have 5 or more employees in California? You may be required to enroll in CalSavers or offer a qualified plan.
Are you starting a new 401(k) plan in 2025 or beyond? Make sure it includes auto-enrollment unless you qualify for an exemption.
2. Choose the Right Retirement Plan
Compare the state-run CalSavers program to private 401(k) options. A custom 401(k) plan may offer more flexibility, higher contribution limits, and the ability to match employee contributions.
3. Document Compliance
Maintain records of employee notices, payroll deductions, and exemption certifications if applicable.
Take the Next Step Toward Compliance and Confidence
Navigating 401(k) mandates doesn’t have to be overwhelming. Our group benefits specialists are available to help you understand your options and design a plan that works for your business. Contact our team to ensure your business complies with current regulations and provides valuable retirement benefits. Together, we can support your employees and strengthen your company’s future.
