California’s one-employee mandate is in effect, and the state is collecting penalties from businesses that miss it. Here’s how to check where you stand.

California’s CalSavers mandate now extends to employers with as few as one California employee, including employers headquartered in other states.

Many employers assume CalSavers only matters if they don’t offer a retirement plan. There’s one more step that’s easy to miss: if you already offer a qualifying plan, you still need to report your exemption to CalSavers.

Who the mandate covers

CalSavers is California’s state-run retirement savings program. Senate Bill 1126, enacted in 2022, expanded the mandate from employers with five or more employees to those with as few as one.

Your business is generally required to facilitate CalSavers if:

• Your business averaged at least one California-based employee during the previous calendar year, including at least one employee age 18 or older.
• You don’t offer a qualifying retirement plan.

CalSavers determines mandate status using employee information reported to California’s Employment Development Department (EDD).

Where your business is headquartered doesn’t change this. A company based in Nevada, Arizona, or another state may be covered if it employs someone in California.

Businesses with no employees other than their owners, along with certain government, religious, and tribal organizations, are exempt. If you receive a CalSavers notice and an exemption applies, report it through the CalSavers employer portal.

Key deadlines

The final phase-in deadline for employers with one to four employees was December 31, 2025. The mandate now covers employers of all sizes that meet the eligibility requirements.

Each spring, CalSavers reviews employee information reported to the EDD for the previous calendar year to identify newly covered employers. Those employers generally have until December 31 of that year to register or report an exemption.

• First reported California employees in 2025: If you received a mandate notice in 2026, your deadline is December 31, 2026.
• First reported California employees in 2026: Your mandate assessment would generally occur in 2027, with a December 31, 2027 deadline if you’re newly mandated.

If your deadline has already passed, act now to avoid enforcement penalties.

Already offer a retirement plan? Report your exemption.

If your business offers a qualifying retirement plan, such as a 401(k), 403(b), SEP IRA, or SIMPLE IRA, you’re generally exempt from facilitating CalSavers. You still need to report that exemption through the CalSavers employer portal.

If you’ve received a CalSavers notice and already offer a qualifying plan, log in to the portal and confirm your exemption is on file.

No retirement plan? Here’s what facilitating CalSavers involves.

If you don’t offer a qualifying plan, you’ll need to:

1. Register your business with CalSavers.
2. Add your eligible employees within 30 days of registration.
3. Set up payroll deductions for participating employees.
4. Submit employee contributions to CalSavers each pay period.
5. Add new eligible employees within 30 days of hire and keep employee information current.

Send contributions to CalSavers promptly after each payroll, within the program’s required timeframe.

Your role as the employer stays limited. You pay no program fees, you aren’t required to contribute, and you have no fiduciary responsibility for employees’ CalSavers accounts or investment choices under the CalSavers program.

What if your employees don’t want to participate?

Employees decide for themselves whether to save. Your obligation to register and facilitate stays the same either way.

Once you submit eligible employee information, CalSavers contacts your employees directly and starts a 30-day decision period.

Employees can opt out or customize their savings choices during that period. Those who don’t take action are automatically enrolled after 30 days.

Asking your team whether they want a retirement plan won’t satisfy the requirement, even if everyone says no.

For employees who participate, CalSavers uses Roth IRAs with a default savings rate of 5% of gross pay. Employees can change their contribution rate or opt out at any time.

Penalties: California is already enforcing compliance

California has enforced CalSavers requirements since 2022. CalSavers identifies noncompliant employers and refers them to the California Franchise Tax Board (FTB), which issues penalty notices and collects payment.

You’ll receive compliance notices before the FTB assesses a penalty. If you don’t act on them, penalties escalate.

For a business with 10 eligible employees, that could mean $7,500 in cumulative penalties after both initial stages. Additional annual penalties may follow until the business comes into compliance.

Registered employers can also face penalties for failing to add eligible employees, facilitate contributions, or remit payroll deductions.

If you receive a notice, respond promptly. Ignoring it can make the situation more expensive.

For details, review the California Franchise Tax Board’s CalSavers enforcement guidance.

Quick checklist

• You offer a qualifying plan: Confirm your exemption is reported in the CalSavers employer portal.
• You don’t offer a plan: Register, add eligible employees, and set up payroll deductions.
• Your employees plan to opt out: Register anyway. Employees make their own choices directly with CalSavers.
• You’re based outside California: Check whether you have California employees and whether your business meets the mandate requirements.
• You’ve received a notice: Respond promptly to avoid additional penalties.

Don’t wait for a penalty notice.

A few minutes spent verifying your registration or exemption today could help you avoid costly penalties later.

To register or report an exemption, visit the CalSavers employer portal. For more information, review the official CalSavers frequently asked questions.

Payroll People Inc. is committed to keeping you informed about payroll and workforce compliance.

This article provides general information and isn’t intended as legal, tax, or investment advice. Please consult your plan administrator or a professional advisor about your specific obligations.