How to Comply With CalSavers: Employer Options & Recommendations
As a business owner and employer, I know that there's an expectation that I provide some level of benefits for my staff. Many people look to employers to pave the way for access to healthcare, and there's a growing call for businesses to help employees shepherd long-term savings for retirement. That's certainly true in California, where the CalSavers mandate now applies to many businesses, even those with only one employee.
I can certainly support the purpose of CalSavers — it's designed to help ensure employees have access to retirement savings programs even if their employers don't offer 401(k) plans or other options. Emerging CPG brands and wineries should understand CalSavers mandates so they can comply and avoid fees or other issues.
In this guide, I'll go over the CalSavers mandate and highlight two options you might consider. I'll also provide some tips for choosing the right solution for your business.
Understanding the CalSavers Mandate
The CalSavers mandate requires employers to sponsor a retirement savings program for employees or to participate in CalSavers if they do not. The requirement began in 2020, but it's been a rolling implementation.
Deadlines for CalSavers compliance depend on how many employees a business has:
Businesses with more than 100 employees must have complied by September 30, 2020.
Businesses with 50 to 99 employees must have complied by June 30, 2021.
Businesses with 5 to 49 or more employees must have complied by June 30, 2022.
Businesses with 1 to 4 employees must comply by December 31, 2025.
Eligibility is based on the average number of employees based on quarterly reports, and at least one employee must be older than 18 years of age.
Employers are exempt from this mandate if they sponsor an ERISA-qualifying retirement plan or another eligible qualified retirement plan. If you're not sure if your CPG business or winery is eligible for CalSavers, consult an accounting professional or connect with Balanced Business Group for guidance.
Option 1: The CalSavers Program
The point of the CalSavers program is to make it easy for small businesses and other entities to offer a retirement savings solution for employees. To do that, the state government provides a savings plan that is easy to set up and doesn't cost employers contributions and fees. Here are some important features of CalSavers, including a few downsides:
You can register your company in as little as a few minutes. You only need a Tax Identification Number or Federal Employer Identification Number, a California payroll tax number, and a CalSavers Access Code. CalSavers sends eligible businesses an access code via mail or email, and you can also request one online.
Enrollment is automatic. When you register, you enter information about your employees, who are notified about their options. They have 30 days to decide if they want to participate in CalSavers, and they can opt out if they don't want to be auto-enrolled.
Employers do not have to pay fees for this process, and you will not have to make any contributions. CalSavers is administered by the state, so you won't have to manage a plan or pay an administrator to do so, which makes this an attractive and cost-effective option for many small businesses.
CalSavers operates on a Roth IRA structure. This does create some income limitations, and employees who make over the income threshold will not be able to contribute to a CalSavers plan. It also means that contribution limits are lower than they would be with a 401(k) plan, which can reduce how much employees can save.
Employers must facilitate payroll deductions to help team members make contributions to their plans. However, these deductions are not pre-tax deductions and don't offer employees the potential tax savings that traditional ERISA plans do.
Option 2: Using Guideline as a CalSavers Alternative
Even as a small employer, you don't have to choose CalSavers. If you're not exempt from the mandate, you just have to provide some qualified retirement plan, and you might opt for a 401(k) through Guideline or another provider instead.
Guideline works with employers of all sizes, and it offers a 401(k) solution for small businesses with 1 to 49 employees for just $39 per month plus $4 per active participant. You can find other plans and tailor options to meet your needs. Benefits of Guideline's plans over CalSavers include options for employer contributions, the fact that employee contributions are pre-tax, and the ability to contribute more per year than with an IRA-based model.
Side-by-Side Comparison: CalSavers vs. Guideline
As an employer, I can see the benefits of both CalSavers and Guideline for smaller businesses such as CPG companies and wineries. Here's a side-by-side comparison to help you make a decision that's right for your business.
CalSavers
Guideline
No cost to the employer
Does involve employer fees, but they are relatively inexpensive
Operates on a Roth IRA model
Operates on a 401(k) model
Employee contributions are after tax, which means they do not get a tax benefit
Employee contributions are pre-tax, so there is a tax benefit
Limited to $7,000 in contributions in 2024 (or $8,000 for those age 50 or older)
Limited to $23,000 in contributions for 2024
No employer contributions
Employer contributions are an option
Minimal administrative guidance and investment options
More administrative guidance and investment options
Is simple and easy to set up
More complex than CalSavers to set up
Enrollment is automatic and requires an opt-out
Enrollment is not automatic and requires an opt-in
How to Choose the Right Compliance Solution for Your Business
To choose the right plan for your business — or to decide if you should just participate in CalSavers — consider factors such as:
Your budget for benefits. Can you afford to pay administrative fees or offer contribution matches? If it's in your benefits budget to do so, I encourage you to consider offering the best possible options for your employees. This can help create more loyal employees.
Your business size. Larger businesses may have more options to consider or more budget for these types of plans. Smaller businesses may only have a few options, and by enrolling in CalSavers, you keep your business compliant for now. You can always upgrade later.
Your administrative capability. Consider how much time you have to contribute to administering a plan — or whether you have anyone on staff who is capable of such work. If you don't, you may want to look at options that let you outsource those efforts.
Your long-term goals as an employer. Growth may require you to invest in your people, and offering a good 401(k) or other retirement savings option with an employer match is one way to do that.
The needs and preferences of your employees. Some employees may prefer the best possible retirement savings opportunities over other perks and compensation. Consider what your employees may want when making decisions about these solutions.
Complying With CalSavers: Making the Best Choice for Your Business
If you haven't already run up against the CalSavers mandate deadline because you only have up to four employees, you have time before you need to comply. Take some time to carefully assess your options, including CalSavers and Guideline, to make a decision about what is best for the future of your business and your team.
Reach out to Balanced Business Group for expert guidance on choosing and implementing the best solution for your company. Connect with our team now; we're ready to help.
Author: Pedro Noyola
Pedro Noyola is the CEO of Balanced Business Group (BBG), a company dedicated to helping Founders in the CPG food and beverage industry gain financial confidence. At BBG, Pedro combines traditional accounting with tailored financial guidance, providing industry-specific insights to ensure sustainable growth for passionate food entrepreneurs. He is also an angel investor and a mentor to emerging CPG brands via SKU and TIG Collective. Pedro’s career spans leadership roles at FluentStream, where he helped the company achieve recognition as one of the Fastest Growing Companies in America by Inc., and Telogis, where he was part of a team that grew the company’s recurring revenue from $50 million to $1.2 billion in under five years.
Pedro holds a BA and MPA from The University of Texas at Austin and an MBA from Harvard Business School. He is an active member of the Young Presidents Organization, continually seeking growth in both leadership and learning. Outside of work, Pedro enjoys family time and outdoor activities, drawing personal fulfillment from his roles as a husband and father.
