CalSavers costs the employer nothing and does almost nothing. A 401(k) costs real money, lets you contribute 3.3× more, lets you match, and generates federal tax credits that often cover the first three years. If the owner earns above the Roth IRA income limits, CalSavers cannot be used by the owner at all — which is usually the deciding fact.
Why you can read this without giving us your email. Every other comparison on this topic is published by a company that sells one of the two options. We are a fee-only fiduciary — we do not receive product revenue either way, and gating a compliance comparison behind a download form seemed like the wrong way to earn your trust.
The full comparison
| CalSavers | Small business 401(k) | |
|---|---|---|
| Account type | Roth IRA | Qualified plan, Roth or pre-tax |
| Employee contribution limit, 2026 | $7,500 | $24,500 |
| Catch-up, age 50+ | $1,100 | $8,000 |
| Enhanced catch-up, ages 60–63 | $8,600 total | $35,750 total |
| Employer contributions | Prohibited | Permitted, including match |
| Owner earning over $168K single / $252K joint | Cannot contribute | Can contribute fully |
| SECURE 2.0 §45E startup credit | $0 | Up to $5,000/yr, 3 years |
| §45T auto-enrollment credit | $0 | $500/yr, 3 years |
| Employer contribution credit | $0 | Up to $1,000/employee |
| Participant fees | $14/yr + 0.225–0.39% | Varies by provider |
| Employer cost | None | Real, often credit-offset |
| Loans permitted | No | Optional by plan design |
| Investment menu control | State-selected | Employer, with adviser |
| Named fiduciary available | No | 3(38) or 3(21) |
| Employer may promote it to staff | No | Yes |
Sources: IRS 2026 contribution limits · CalSavers fee schedule effective 1 May 2026 · SECURE 2.0 Act §§ 45E, 45T · Cal. Gov. Code § 100033.
Three corrections to what you'll read elsewhere
1. The startup credit is usually not $5,000
Most competitor pages state a flat $5,000. The actual formula caps it at the greater of $500, or the lesser of $250 × your non-highly-compensated employees or $5,000. A four-person shop with three NHCEs caps at $750 a year, not $5,000. Plan on the real number — the calculator applies the actual formula.
2. CalSavers fees came down on 1 May 2026
The current schedule is $14 per year plus 0.225–0.39%. Pages still quoting 0.825–0.99% are stale. CalSavers is cheaper than its critics say — it is just far more limited.
3. The penalty is not "$500 per 30 days"
A widely-shared accounting-firm page says this. The statute says $250 per eligible employee at 90 days, plus $500 at 180 — a $750 maximum, then $500 annually while non-compliant. The penalty schedule, with the citation →
When CalSavers is genuinely the right answer
We would rather say this plainly than pretend otherwise. Register with the state and stop reading if: you have very few employees and no intention of contributing yourself; your margins genuinely cannot absorb any plan cost even after credits; or you want zero administrative involvement. It is a reasonable program and it satisfies the law.
A private plan tends to win when the owner wants to save meaningfully, when a match would help you keep people, or when the credits cover the cost — which, for employers under 50 staff, they frequently do.
Common questions
Does a SEP or SIMPLE IRA also satisfy the mandate?
Yes. Qualifying plans include 401(a) and 401(k) plans, 403(a) and 403(b) plans, SEP (408(k)) and SIMPLE (408(p)) plans, and pooled employer plans. Sponsor any of them, then certify your exemption.
Can I offer both — CalSavers for some staff and a 401(k) for others?
No. Employers with a qualified plan certify an exemption; exempt employers are prohibited from participating in CalSavers. It is one path or the other.
If CalSavers is free for me, who pays its fees?
Your employees. Savers pay 100% of program fees — $14 a year plus 0.225%–0.39% of assets under the schedule effective 1 May 2026. In a 401(k), the employer may pay administrative fees and deduct them.
Is a 401(k) really worth it for a business my size?
Run the numbers rather than guess: the cost calculator compares both options in about a minute, credits included. For many employers under 50 staff the credits cover most of the first three years.
Run it on your actual numbers
The calculator takes about a minute. Or we will do it with you and explain what drives the answer.