401(k) Requirements & Deadlines for California Small Businesses
For California small business owners, understanding both federal and state deadlines for retirement plans is crucial to stay compliant, get tax benefits, and avoid penalties. Below are the key deadlines and rules you need to know.
1. California State Mandate — CalSavers
If your business doesn’t already offer a private retirement plan, California law requires you to either sponsor one or facilitate the state-run program CalSavers. Employment Development Department
- If you have 5 or more employees, your deadline to register with CalSavers was June 30, 2022. CalSavers
- If you have 1-4 employees, your deadline is December 31, 2025. Employment Development Department
- Employers must ensure they either offer their own qualified plan (e.g. 401(k)) or register for CalSavers by these deadlines. Noncompliance can lead to penalties of $250 per eligible employee, increasing if the noncompliance persists. CalSavers
2. Federal Deadlines for Contributions & Deposits
Here are the federal deadlines small businesses need to watch for if they set up their own 401(k) or qualified retirement plan (versus using CalSavers).
a. Employee Elective Deferrals (Payroll Withheld Contributions)
- These contributions (pre-tax or Roth) must be deposited into the plan trust as soon as reasonably possible after withholding. IRS
- Generally no later than the 15th business day of the month following the month in which the paycheck was withheld. Employee Fiduciary
- For small plans (usually those with 100 or fewer participants), there’s a “safe harbor” that allows a shorter timeframe—within 7 business days of withholding. Employee Fiduciary
b. Employer Contributions (Match, Profit Sharing, etc.)
- To claim the employer contribution as a tax deduction, the contribution must be deposited by the due date of the employer’s tax return (including extensions). DWC 401k
For example:
If your business is an S-Corporation or Partnership / LLC taxed as a partnership, your tax return is generally due March 15, and the extended deadline is September 15. Employee Fiduciary
If you’re a C-Corporation (or LLC taxed as a C-Corp), the deadline is generally April 15, with extension available until October 15. Employee Fiduciary
3. Putting It All Together — What You Should Do Now
- Check if you are already in compliance with CalSavers. If you don’t offer a qualified plan and haven’t registered by your deadline, do so immediately. Employment Development Department
- Set up your own plan if that’s preferable — some businesses prefer a 401(k) or other qualified plan because it can offer more flexibility (e.g. matching, plan design, possibly better investment options) compared to CalSavers.
- Ensure payroll deferrals are deposited promptly. Don’t wait until the end of the month. Having a plan in place for how soon after each payday you move withheld amounts into the trust helps avoid compliance issues.
- Make employer contributions by your business’s tax return deadline (or extension) to capture the tax deduction for that year.