If you employ five or more people in California and don't offer a qualified retirement plan, the state requires you to either offer one or enroll your employees in CalSavers — the California Secure Choice Retirement Savings Program. It is not optional, and the deadlines have already passed for most employer sizes.
Below is what the setup actually involves, what it costs (including that $100 question), and how it flows through payroll.
What is CalSavers?
CalSavers is a state-administered retirement savings program created under California Government Code § 100000 et seq. It allows employees to contribute to an individual retirement account (IRA) via automatic payroll deductions, with no employer match required and no employer fiduciary responsibility.
Key features:
- No employer match — you facilitate the deduction, the state administers the account.
- No employer fees to run the program.
- Employees can opt out at any time.
- Default contribution starts at 5% of gross pay, with an automatic annual escalation of 1% per year up to 8% (unless the employee elects otherwise).
Who must register?
Employers with five or more employees that do not sponsor a qualified retirement plan (such as a 401(k), 403(b), SEP, or SIMPLE IRA) are required to register with CalSavers. Employers with fewer than five employees are not required — but may voluntarily participate.
Registration deadlines were staggered by employer size and have all passed:
| Employer size | Deadline status |
|---|---|
| 100+ employees | Deadline passed — already required |
| 50–99 employees | Deadline passed — already required |
| 5–49 employees | Deadline passed — already required |
If you are a covered employer and have not registered or claimed an exemption, you are already out of compliance.
How to claim an exemption
You do not have to use CalSavers if you already offer a qualifying retirement plan. To claim an exemption, you must register on the CalSavers portal and certify that you sponsor an eligible plan. Simply having a plan is not enough — you must actively claim and periodically reconfirm the exemption.
- Register on the CalSavers employer portal.
- Select "exemption" and certify your qualifying plan.
- Keep documentation of the plan on file.
What about that $100 setup fee?
CalSavers itself does not charge employers a setup fee to register. Employer participation is free. Where the "$100 setup" line item commonly comes from is a third-party payroll or administrative provider that charges a one-time onboarding fee to configure CalSavers deductions, set up employee records, and wire the contributions into payroll.
That is important to distinguish:
- CalSavers registration cost to the employer: $0
- Payroll provider setup fee (if any): varies — a $100 one-time setup charge is common for adding a new deduction type, connecting to CalSavers, and setting up the employee list.
If you see a "$100 setup fee," it is almost always the payroll provider's administrative charge — not a state fee. It does not replace your obligation to register with CalSavers if you are a covered employer.
CalSavers cost breakdown
| Item | Cost | Who pays |
|---|---|---|
| CalSavers program administration | $0 to employer | State / employee investment fees |
| Employer registration | $0 | No one |
| Payroll setup / deduction configuration | Provider-dependent (e.g., ~$100 one-time) | Employer |
| Ongoing per-payroll processing | Covered by your payroll service | Employer |
How CalSavers flows through payroll
Once registered and configured, the process is a standard deduction workflow:
- 1. Employees are added to the CalSavers system (after the 30-day notification window).
- 2. A default 5% deduction is applied to each participating employee's gross wages.
- 3. The deduction is withheld each pay period and remitted to CalSavers on the required schedule.
- 4. Employees who opt out are excluded from the deduction.
- 5. The deduction appears on the employee's pay stub as an itemized deduction.
Because these are payroll deductions, they must be reflected correctly on the itemized wage statement required by Labor Code § 226.
Penalties for non-compliance
Employers that fail to comply are subject to penalties imposed by the California Franchise Tax Board (FTB):
| Violation | Penalty |
|---|---|
| Failure to register or offer a qualifying plan | $250 per employee (first notice) |
| Continuing failure after notice | $500 per employee (subsequent notice) |
With a 5-employee minimum, exposure starts at $1,250 and escalates quickly per notice.
Setup checklist
- ☐ Confirm whether you are a covered employer (5+ employees, no qualifying plan)
- ☐ Register with CalSavers or claim a plan exemption
- ☐ Provide the required 30-day employee notification
- ☐ Configure the 5% default deduction in payroll
- ☐ Ensure the deduction is itemized on wage statements
- ☐ Set up the remittance schedule to CalSavers
- ☐ Track opt-outs and update employee records
CalSavers compliance is really two separate tasks: register (or claim an exemption) with the state, and wire the payroll deduction correctly. The "$100 setup fee," if you see one, is a payroll provider charge for the second part — not a state requirement. Neither replaces the other.
Need help registering with CalSavers or setting up the payroll deduction? Glendale Payroll Inc. handles CalSavers registration, deductions, wage statements, and California compliance filings for small businesses across Glendale and Los Angeles. Reach out for a free consultation.