Effective June 30, 2021, California law now requires that all employers with fifty or more employees must have either an employer sponsored retirement plan or a CalSavers plan. The CalSavers law will eventually require employers with five or more employees to comply.

There are many benefits for employers to maintain an employer sponsored retirement plan for their companies, as well as their employees. In order to be exempt from CalSavers the employer must maintain a qualified retirement plan (i.e. 401(k) Profit Sharing Plan, Profit Sharing Plan, Defined Benefit Pension Plan or Cash Balance Pension Plan). Below is an illustration of the differences between an employer sponsored 401(k) Profit Sharing plan and a CalSavers plan:

401(K) Profit Sharing
2021 Limits
2021 Limits

Maximum employee contribution limit



Additional contribution if age 50 or older



Employee contributions

Pre-tax or after-tax (ROTH)

After tax only (ROTH)

Employee contribution percentage

Discretionary percentage

5% automatic unless elect different rate or opt out (increases by 1% per year, up to 8% maximum)

Employer match

Discretionary up to $19,500 (or $26,000 if age 50 or older)

Not Allowed

Employer Profit Sharing

Discretionary total allocation up to $58,000 (reduced by employee deferral and employer match)

Not Allowed

Tax credit for establishing new plan

Up to $5,000 per year for the first three years


Employer Responsibilities

Hire a Third Party Administrator (TPA) to handle plan administration

Track employee eligibility                

Send data to CalSavers

Distribute annual notices                

Auto-enroll new employees          

Adjust contributions every January 1st

Employers maintain an employer sponsored retirement plan or enroll in CalSavers by the following deadlines: 

Business SizeDeadline

More than 50 employees

June 30, 2021

Five or more employees

June 30, 2022

Employers that fail to either maintain an employer sponsored retirement plan or enroll in CalSavers, by the implementation deadline, may be subject to penalties. The penalties start at $250 and can increase up to $500, per eligible participant.

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