This page covers one thing: how CalSavers penalties are calculated and what to do after a penalty notice. For who must comply, the registration deadlines and how to get exempt, see the CalSavers requirements and deadlines page.
How the penalty works
CalSavers penalties are set by California Government Code section 100033 and collected by the Franchise Tax Board under Revenue and Taxation Code sections 19287 and 19288. They apply to an eligible employer that, without good cause, fails to let its eligible employees participate.
- First notice: $250 per eligible employee.
- Second notice: an additional $500 per eligible employee if noncompliance continues.
- Each later calendar year: $500 per eligible employee for every later calendar year of noncompliance, consecutive or not (Cal. Code Regs. tit. 10, §10008(c)).
The penalty is counted per eligible employee, so the number of eligible employees drives the total.
Worked examples
A business with 12 eligible employees
- First notice: 12 × $250 = $3,000.
- Second notice: 12 × $500 = $6,000 more.
Total if the employer reaches the second notice: $9,000. Each later calendar year out of compliance adds 12 × $500 = $6,000.
A business with 30 eligible employees
- First notice: 30 × $250 = $7,500.
- Second notice: 30 × $500 = $15,000 more.
Total if the employer reaches the second notice: $22,500. Each later calendar year out of compliance adds 30 × $500 = $15,000.
The notice sequence
- Notice of penalty application. The CalSavers Retirement Savings Board notifies an employer that has not let its employees participate, then issues a final notice of penalty application.
- First Franchise Tax Board notice. After the Board reports the noncompliance, the Franchise Tax Board issues the first notice imposing the $250-per-employee penalty.
- 90 days to appeal. Within 90 days of that first notice, you can appeal the penalty in writing to the Franchise Tax Board, which hears the appeal and notifies you of its decision in writing.
- Second notice. If no appeal is filed, the Franchise Tax Board issues the second notice, adding $500 per eligible employee, within 90 days after the first. If you appeal and the penalty is sustained, the second notice comes within 90 days after that decision.
What to do after a notice
- Register with CalSavers or file your exemption right away, so noncompliance does not continue toward the second notice.
- If you had good cause, or the employee count is wrong, file a written appeal with the Franchise Tax Board within 90 days of the first notice.
- Keep copies of the notices and of your registration or exemption confirmation.
Avoiding the penalty with your own plan
A qualified plan such as a 401(k) or SIMPLE IRA exempts you from CalSavers once you file the exemption. Credits can offset much of the startup cost for eligible employers. See who must comply and the current deadlines, or book a free 15-minute audit.
Sources: Cal. Gov. Code §100033; Cal. Rev. & Tax. Code §§19287, 19288; Cal. Code Regs. tit. 10, §10008. Informational only, not legal advice.