California business owners find are shocked at how much this new rule costs them!
Just a few quick questions about your business. No email, no card, and completely free advice to save your business money.
Checking your headcount against the penalty schedule…
Your exposure · 12 employees
$0
Here is the part nobody tells you
Doing nothing
$0
Assessed per employee, and the state can charge it again for every year it goes unfixed. Nothing about it comes back to you or to them.
- At 90 days past the notice$0
- At 180 days, on top$0
Running your own plan
$0
Federal tax credits you become eligible for, over the first five years. The penalty goes away either way — this part only exists on this side.
- Start-up credit, three years$0
- Automatic enrolment, three years$0
- Contribution credit, five years$0
The distance between the two decisions
$0
What you get for joining, free
- Your numbers in writing. This calculation, with the statute sections behind each figure, in a form your CPA can check.
- CalSavers against your own plan, side by side. Sometimes the state programme genuinely is the right answer for a small payroll, and we say so.
- Eight courses for your staff, at no cost to them or to you. Credit, budgeting, investing, buying a first home.
- Thirty minutes with a licensed professional. No product presented, no fee, and a written summary afterwards.
No card. You keep the tools whether or not you ever talk to us.
Why the two paths are not the same thing
Since 1 January 2026 every California employer with at least one W-2 employee has to offer a retirement plan or register with CalSavers. Both satisfy the mandate. That is where the similarity ends.
CalSavers is a payroll-deduction Roth IRA. Your employees fund it out of their own pay, you put in nothing, and because you put in nothing there is no federal tax credit attached to it. It stops the penalty and returns you exactly zero.
A different path for your business
A plan of your own stops the same penalty, and because it is yours the SECURE 2.0 credits apply: up to $5,000 a year of start-up costs for three years, $500 a year for automatic enrolment, and up to $1,000 per employee a year of what you contribute, tapering across five years. For most businesses under fifty people the credits cover the cost of the plan in full for the first few years, which is the part that surprises owners.
None of that makes your own plan automatically right. It costs more to run, it carries duties CalSavers does not, and for a payroll of three people it is often not worth it. What it does mean is that the choice deserves ten minutes of arithmetic rather than whichever form lands on your desk first.
Understand the estimates before you decide
Estimates only, for discussion. Penalty amounts are set by California Government Code section 100033(b). Credit figures follow the SECURE 2.0 Act: the start-up credit covers 100% of qualified costs to $5,000 a year for employers with 50 or fewer employees and 50% above that, the automatic enrolment credit is $500 a year for three years, and the employer contribution credit is up to $1,000 per employee at 100% in the first two years before tapering to 75%, 50% and 25%, with a further reduction above 50 employees.
Your own position depends on your plan design, your payroll and your tax situation. We are not a tax firm or a law firm and this is not tax or legal advice. Take the numbers to your CPA, and we will happily join that conversation.