Did you know that as of December 31, 2025, every employer in California with at least one employee needs to offer a retirement benefit?¹ Chances are — even if you're impacted — you don’t know.
The requirement is part of the CalSavers mandate, which is estimated to impact more than 4.2 million businesses state-wide — of which 76% have under 5 employees.7 It's related to a broader legislative movement across the country aimed at helping more people gain access to retirement benefits. While these new laws are an important step towards closing the retirement gap, there's one problem: most don't see it coming.
Our research shows that three quarters (75%) of small business owners aren't familiar with CalSavers and many (65%) don't realize they could be fined up to $750 per employee if they don't comply.²
While California has rolled out the CalSavers mandate in phases, 2025’s deadline was the final and most sweeping yet. To help Californians prepare, we surveyed over 2,000 SMB owners and people who work in California to see how they're planning to stay compliant.
Own a California business? Here is key information about the mandate.
First things first — let's cover the basics about the CalSavers retirement mandate.
California passed the retirement mandate in 2019 and has been slowly rolling it out since 2020. At first, the mandate impacted larger employers, but as of the end of 2025, any business with at least one W-2 employee is required to offer a qualifying retirement plan.
Why? Because California wants you (and your employees) to be able to retire someday. But, without greater awareness, the unexpected fines could catch thousands of small businesses by surprise.
Non-compliance could cost small businesses thousands of dollars a year
What exactly do the fines look like? Once you're 90 days past the deadline for your company size, you should expect a notice from the California Franchise Tax Board or the CalSavers Retirement Savings Board along with a $250 fine per employee.³
Here’s how those fines could compound the longer you fail to comply:
90 days: $250/employee ($750 for 3 employees)
180 days: $500/employee ($1,500 for 3 employees)
Year 2: $500/employee ($1,500 for 3 employees)
Year 3: $500/employee ($1,500 for 3 employees)
Total: $5,250
Any graphs or charts depicted are illustrative, for educational purposes only, and not intended to be investment, tax, and or legal advice.
The mandate impacts millions of people who don't know about it
There's a big difference between knowingly accepting the cost of non-compliance and being blindsided by unexpected fines. Yet that's what's happening to many small business owners: Most simply don't know about the mandate or fines.³
Of small businesses surveyed:
75% weren't familiar with CalSavers
65% didn't know they could be fined
And it isn't just employers who are in the dark. Most workers also don't know about their right to an employer sponsored retirement benefit.5
These findings are especially surprising given that legislation for the mandate was passed over five years ago.
The 401(k) is an affordable alternative to CalSavers — but many don't know about the tax benefits
Businesses have many alternative options to meet the CalSavers mandate — like a 401(k).
Yet, our survey found there's a barrier to offering one: Over half of business owners think a 401(k) is too expensive or too complicated.²
Luckily, that doesn't need to be the case.
In fact, there are two solutions that work together to make a 401(k) affordable:
SECURE 2.0 tax credits that can fully cover a 401(k) plan's costs up to $16,500 for employers with 50 or fewer employees (50% for employers with 51-100 employees) and,
Starter 401(k) plans through providers like Gusto, which start at $49 per month and simplifies administration.
However, there is a major information gap there, too.⁴ Many small businesses don't know that tax credits could help cover the costs of starting a 401(k) — and want to learn more.²
Small businesses and tax credits:
68% of small businesses are unaware tax credits could cover 100% of 401(k) startup costs
40% want to learn more
Employees and employers prefer a 401(k) over a state-run IRA 5; 6
Although shockingly few (41%)⁵ employees know about their rights to employer sponsored retirement — the second most important benefit to people after health insurance — they have strong feelings about 401(k) plans. In fact, when comparing a 401(k) directly to the state-run IRA, employees overwhelmingly prefer a 401(k) plan.⁵
70% of employees prefer a 401(k) over a state-run IRA
That trend also holds true for employers who are hesitant to choose the state program for a number of reasons.⁶
Why businesses don't choose CalSavers:
16% peers advised against
18% don't trust government with money
32% don't trust state-run investment programs
Why businesses switch from CalSavers to options like a Gusto 401(k)
What were business owners' direct experiences with CalSavers? We turned to our customers based in California to find out. Of those surveyed, 38% signed up with Gusto 401(k) because of the retirement mandate, 25% of whom had chosen CalSavers first before switching to Gusto 401(k).⁶
Of those who started with CalSavers, it was clear they wanted a more seamless and robust benefit for their teams.⁶
Top reasons people switched from CalSavers to Gusto 401(k):
67% due to too much manual work
40% wanted to offer an employer contribution
27% needed a more competitive benefit
Many shared that cost isn't the only factor in choosing a retirement benefit. While CalSavers might be "free," admin time and integrations matter.⁶
91% who switched from CalSavers said it isn't really "free" due to extra time spent on admin.
89% chose Gusto 401(k) for payroll integrations that automate admin.
"State retirement programs aren't really free. You need to consider the administrative labor added to every payroll run. Going with our state program meant manual calculations, dealing with employee information changes, and managing money movement."
Rich H., Pallas Care
Client of Gusto Retirement. No compensation provided. Views may not be representative of other clients.
At the end of the day, 86% wish they went with Gusto instead of trying CalSavers.⁶
Businesses can benefit when they switch from CalSavers to Gusto 401(k):
100% eliminated payroll/admin errors
93% spent less time on admin
93% found the investment experience better
93% found customer support superior
Closing the retirement gap together
The retirement gap is real — and state mandates like California's are helping close it by ensuring workers at even the smallest businesses have access to savings.
Fortunately, there are more affordable retirement options than ever. With low-cost plans and tax credits, many small businesses can offer benefits at little to no cost — while empowering their teams to build lasting financial security.
For more information on CalSavers, visit their official website. Already a Gusto customer? Get started with a Gusto 401(k) now.
FAQs
What is the CalSavers mandate and who does it apply to?
CalSavers is a California state law requiring employers to offer workers access to a retirement savings plan. As of December 31, 2025, the mandate applies to every California employer with at least one W-2 employee — making it the broadest phase of the rollout yet, covering an estimated 4.2 million businesses statewide.
What is the deadline for the California retirement mandate?
The deadline for employers with 1–4 employees was December 31, 2025. Larger employers faced earlier deadlines in prior years. If your business hasn't already registered with CalSavers or enrolled in a qualifying plan like a 401(k), you need to act now to avoid fines.
Each year, newly eligible employers face a December 31 deadline in the year they become eligible.
What are the penalties for not complying with CalSavers?
Non-compliant employers can be fined $250 per employee starting 90 days after the deadline, rising to $500 per employee at 180 days. For a business with just 3 employees that remains non-compliant for three years, fines can total $5,250 — and most business owners don't know this risk exists.
Is a 401(k) a valid alternative to enrolling in CalSavers?
Yes. Businesses that already sponsor a qualifying retirement plan — such as a 401(k) — are exempt from CalSavers. A 401(k) can also be more attractive to employees: 70% of California workers surveyed prefer a 401(k) over the state-run IRA, and employers who've switched from CalSavers report significant reductions in admin time and errors.
Are there tax credits to help small businesses afford a 401(k)?
Yes. Under SECURE 2.0, eligible small businesses can claim tax credits that cover up to 100% of 401(k) startup costs, up to $16,500 total. Despite this, 68% of small business owners surveyed didn't know these credits exist. Consulting a tax professional can help you understand what your business qualifies for.
Disclosures
¹ The CalSavers mandated registration deadline with at least 1 employee (as reported to the EDD in the preceding calendar year), who are not otherwise exempt from participation, can register with CalSavers. The registration deadline for employers with 1-4 employees was December 31, 2025. Requirements to report your exemption apply. Gusto has prepared this summary from third-party sources as of July 2026. The information herein is considered to be reliable at the time of writing, may not necessarily be all-inclusive, is not guaranteed as to accuracy and is subject to change at any time without notice. The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances. Investing involves risk and investments may lose value. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein. Deadlines, fees, and other program details are subject to change by the state without notice and should be checked prior to making any decisions and can be reviewed by visiting the State of California's Franchise Tax Board. Visit the CalSavers site to learn more.
² Gusto research run with Suzy. Insights based on data collected February 2025 from a survey of 1003 respondents who identified as California-based small business owners. Gusto was not identified as the survey sponsor. The experiences of the respondents in this survey may not be representative of all people.
³ The CalSavers mandated registration deadline with at least 1 employee (as reported to the EDD in the preceding calendar year), who are not otherwise exempt from participation, can register with CalSavers. CalSavers mandated registration deadlines found here. Requirements to report your exemption apply. Gusto has prepared this summary from third-party sources as of June 2025. The information herein is considered to be reliable at the time of writing, may not necessarily be all-inclusive, is not guaranteed as to accuracy and is subject to change at any time without notice. The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances. Investing involves risk and investments may lose value. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein. Deadlines, fees, and other program details are subject to change by the state without notice and should be checked prior to making any decisions and can be reviewed by visiting the State of California's Franchise Tax Board. Visit the CalSavers site to learn more.
⁴ You should consult a tax professional to determine what types of tax credits or deductions your company is eligible to claim.
⁵ Gusto research run with Suzy. Insights based on data collected February 2025 from a survey of 1002 California-based employees who do not have a retirement benefit from their employer. Gusto was not identified as the survey sponsor. The experiences of the respondents in this survey may not be representative of all people.
⁶ Research insights based on data collected in March 2025, from a survey conducted by Gusto, Inc. that consisted of 156 current clients based in California. Of these, 59 clients signed up because of the mandate, and 15 clients tried CalSavers before switching to Gusto. Gusto was identified as the survey sponsor. Though the survey is broad in scope, the experiences of the respondents in this survey may not be representative of all clients.
⁷ State of California, Employment Development Department, Labor Market Information Division, Size of Business Report, Number of Businesses, Number of Employees, and Quarterly Payroll by Size of Business, 2025 Quarter 1. Figures reflect establishments covered by unemployment insurance reporting and may not capture every business structure.
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