CalSavers or your own plan? What California owners need to decide
Since January 1, 2026, most California employers with at least one eligible W-2 employee (other than owners) must either offer a qualified retirement plan or register with CalSavers, the state-run program. The final group, businesses with one to four employees, faced a December 31, 2025, deadline. Doing nothing is no longer an option. Not sure which path fits? Request a plan review.
What happens if you ignore it
CalSavers notifies employers that appear to be out of compliance. If a business still hasn’t registered or certified an exemption 90 days after a notice, the penalty is $250 per eligible employee; after 180 days, an additional $500 per eligible employee can apply.
Path 1: Register with CalSavers
- CalSavers sets up a Roth IRA for each employee by default, funded only by payroll deductions (default 5% of pay, rising 1 percentage point a year to 8% unless the employee changes it; employees can opt out). Roth IRA income limits apply, and employers cannot contribute.
- 2026 savings limit: $7,500 ($8,600 at age 50+), the annual IRA limit, shared with any other IRAs the employee has.
- It still takes some work: you register, upload an employee roster and remit deductions every payroll.
Path 2: Sponsor your own plan
- A 401(k) (including a SECURE 2.0 starter 401(k), a deferral-only plan with no employer contribution), SIMPLE IRA, SEP IRA or profit-sharing plan satisfies the mandate. You then certify your exemption on the CalSavers employer portal (see how to certify your CalSavers exemption).
- Owners can save far more: a 401(k) allows $24,500 in 2026 deferrals (plus $8,000 catch-up at 50+, or $11,250 at ages 60–63), with total annual additions up to $72,000. Starting in 2026, participants whose prior-year FICA wages exceeded $150,000 must make catch-up contributions as Roth (after-tax), and the plan must offer a Roth option for them to make catch-ups at all. Sole proprietors and partners with no W-2 wages are not subject to this rule; S-corporation owners paid through W-2 are.
- You can add an employer match or profit sharing that employees see as part of their pay.
- Eligible small employers may qualify for federal tax credits that offset part of the first years’ cost.
The quick comparison
| Feature | CalSavers | Your own plan |
|---|---|---|
| Employee limit (2026) | $7,500 IRA limit | Up to $24,500 in a 401(k) |
| Employer contributions | Not allowed | Match or profit sharing, your design |
| Owner savings potential | $7,500 IRA limit ($8,600 at 50+) | Up to $72,000 total additions, plus catch-up |
| Federal startup tax credits | No | May qualify |
Questions to answer before you choose
- How much do you, as the owner, want to save each year?
- Would a match help you hire or keep good people?
- What can the business comfortably contribute in a slow year?
- Who will handle the paperwork: you, your office manager or a provider?
CalSavers is a compliance tool. Your own plan is a business tool. For eligible employers, federal tax credits can narrow the cost difference (see what a plan really costs after SECURE 2.0 credits).
Common questions
Does offering my own retirement plan exempt me from CalSavers?
Yes. An employer that sponsors a qualifying plan, such as a 401(k), SIMPLE IRA or SEP IRA, is exempt. You certify the exemption on the CalSavers employer portal.
What are the CalSavers penalties?
If an employer has not registered or certified an exemption 90 days after a notice, the penalty is $250 per eligible employee. After 180 days, an additional $500 per eligible employee can apply.
Can an employer contribute to CalSavers?
No. CalSavers is funded by employee payroll deductions only. Employers cannot add a match or profit sharing.
Want to see what this means for your business?
Tell us your headcount and goals, and we’ll compare CalSavers with your own plan using your numbers. The initial plan review is complimentary, and we aim to reply within one business day.
Request a plan reviewGeneral educational information as of September 24, 2026; limits and rules change. Not individualized investment, tax or legal advice. Consult your tax adviser about your situation.