California small businesses are now required to take action when it comes to employee retirement plans. Under the state’s CalSavers mandate, all California employers with at least one employee must either offer a qualified retirement plan or comply with CalSavers requirements.

This is no longer just a future consideration. Employers who fail to comply risk financial penalties and administrative issues. Understanding your obligations and your options is essential to staying compliant and protecting your business.

With guidance from Scout Wealth Advisors, California employers can navigate these requirements with confidence while choosing a retirement solution that fits their long-term goals.

California Retirement Mandate: What Employers Must Know

California law requires all employers with one or more employees who do not already offer a qualified retirement plan to register for CalSavers.

CalSavers is a state-sponsored retirement savings program that allows employees to save for retirement through automatic payroll deductions when their employer does not provide a private plan.

Key mandate details for California employers:

• All employers with at least one employee must comply if they do not offer a qualified retirement plan.
• Employers must register with CalSavers and facilitate payroll deductions for eligible employees.
• Employees control their contribution amounts and investment selections.
• Penalties for non-compliance start at $250 per employee and can increase if the business remains non-compliant.

Failing to register or meet the mandate can quickly become costly. Taking action early helps businesses avoid penalties and ensures compliance with state regulations.

Scout Wealth Advisors helps employers understand these requirements and determine whether CalSavers or a private retirement plan is the better fit.

CalSavers vs. 401(k): Understanding Your Options

While CalSavers meets the state requirement, many employers choose to offer a private 401(k) plan instead as a more comprehensive long-term solution. Although CalSavers provides a basic way for employees to save, it is designed as a minimum compliance option rather than a customizable benefit. A 401(k) gives employers greater flexibility and control, allowing them to design a retirement plan that aligns with both business goals and employee needs.

Compared to CalSavers, a 401(k) allows employers to:

• Offer employer matching or profit-sharing contributions to help employees grow their retirement savings faster
• Provide a wider range of investment options, giving employees more choice and control
• Customize plan features such as eligibility rules, vesting schedules, and contribution limits
• Strengthen employee recruitment and retention by offering a competitive and valuable benefit

In addition to flexibility, a 401(k) can help position a business as an employer that invests in its workforce. Employees often view employer-sponsored retirement plans as a sign of stability and long-term commitment, which can lead to higher participation, improved morale, and reduced turnover.

For employers who want more control, added value, and the ability to go beyond basic compliance, a 401(k) can be a strategic alternative to the state program while still satisfying California’s retirement mandate.

Benefits of a 401(k) for Small Businesses

Offering a 401(k) goes beyond basic compliance. When implemented thoughtfully, it can support business growth, strengthen workplace culture, and improve overall employee satisfaction. A strong retirement plans benefit helps small businesses remain competitive while reinforcing long-term stability for both the employer and the workforce.

Key advantages include:

• Attracting and Retaining Talent – Competitive retirement benefits help small businesses compete with larger employers and can influence candidates’ decisions when choosing between job offers.
• Tax Advantages – Employer contributions and eligible plan-related expenses may offer tax benefits that support overall financial efficiency.
• Employee Financial Security – Supporting retirement savings encourages loyalty, long-term engagement, and greater peace of mind among employees.
• Flexible Plan Structures – Options such as Traditional 401(k), Safe Harbor 401(k), and SIMPLE 401(k) allow businesses to tailor the plan to their size, goals, and workforce needs.

A well-designed 401(k) demonstrates a clear commitment to employees’ financial futures while positioning the business as a responsible and forward-thinking employer.

Steps to Ensure Retirement Plan Compliance

To avoid penalties and remain compliant with California law, employers should take the following steps:

1. Confirm Compliance Status – Determine whether your business already offers a qualified retirement plan or must register for CalSavers.
2. Evaluate Retirement Options – Compare CalSavers with private 401(k) plans to identify the best fit.
3. Prepare Payroll Systems – Ensure payroll processes can support deductions and reporting requirements.
4. Communicate With Employees – Clearly explain how the retirement plan works and what actions employees need to take.
5. Review Annually – Monitor compliance, participation, and regulatory updates.

Proactive planning helps prevent penalties and simplifies ongoing administration.

Take Control of Your Retirement Plan Strategy

California’s retirement mandate applies to employers of all sizes, making proactive planning essential for staying compliant. Understanding how the mandate applies to your business, and whether a state program or a private retirement plan is the better fit, can help prevent administrative issues and reduce unnecessary risk. Taking action early also allows employers to implement a solution that supports both compliance and long-term business goals.

Ready to confirm your compliance or explore a 401(k) option?
Contact Scout Wealth Advisors today for clear, expert guidance.