California’s Retirement Deadline Is Coming — And Most Small Businesses Are Unprepared

Did you know that by December 31, 2025, every employer in California with at least one employee will need to offer a retirement benefit?¹ Chances are — even if you’re impacted — you didn’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 400,000 have under 5 employees. 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, this year’s deadline is the final and most sweeping yet. To help Californians prepare for what’s ahead, we surveyed over 2,000 SMB owners and people who work in California — including ~150 Guideline customers — to see how they’re planning to stay compliant.

Own a California business? Here are key dates and 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 by the end of 2025, any business with at least one W-2 employee will be 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

The chart below shows how those fines could compound the longer you fail to comply.

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

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.²

These findings are especially surprising given that legislation for the mandate was passed five years ago.

Even more surprising is that awareness about CalSavers has stayed stagnant among business owners over the years — in a 2022 survey we also found that nearly three quarters of California business owners were unfamiliar or unaware of CalSavers.

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:

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

Both employees and employers prefer a 401(k) over a state-run IRA⁵

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

That trend also holds true for employers who are hesitant to choose the state program for a number of reasons.⁶

Why businesses switch from CalSavers to options like a Guideline 401(k)

What were business owners’ direct experiences with CalSavers? We turned to our own Guideline customers based in California to find out. Of those surveyed, 38% signed up with Guideline because of the retirement mandate, 25% of whom had chosen CalSavers first before switching to Guideline.⁶

Of those who started with CalSavers, it was clear they wanted a more seamless and robust benefit for their teams.⁶

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

"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

At the end of the day, 86% wish they went with Guideline instead of trying CalSavers.⁶

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.