California’s State Retirement Mandate—Know Your Options

The state of California requires businesses to offer a retirement plan to their employees. You can choose a retirement plan from a provider or the state-run IRA. Before making a decision, be sure you’ve considered all your options. A Paychex retirement plan integrated with payroll may be a better fit for you and your employees and could even save your business money.

Paychex Retirement Options—Savings and Simplicity

When you choose Paychex for your retirement plan, you can fulfill the state mandate and offer your employees a robust plan with higher contribution limits. The Paychex traditional 401(k) or Pooled Employer Plan (PEP) make it easier for smaller businesses to offer a 401(k) plan. Paychex takes care of administration and enrollment, reducing your liability and increasing the potential for savings.

You may also be eligible for SECURE Act tax credits, which can add up to $16,500 over 3 years (depending on eligibility and adding auto enrollment). If you choose the state-run CalSavers plan, you will not be eligible for the tax credit.

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Which Future 401(k) Plan Fits Your Business Better - A Pooled Employer Plan (PEP) or a Traditional 401(k) Plan?

Compare the highlights and features of a PEP vs. a traditional 401(k) plan. Both are excellent options for you and your employees to save for retirement and save on taxes. A traditional 401(k) with your choice of additional services gives you more control, but it can be costlier and entail more work on your part. In a PEP, the Pooled Plan Provider (P3) is the plan administrator, so you have less control but also reduced cost and liability.


PEP or Traditional 401(k)

Pooled Employer Plan

Less Work and Lower Cost

Traditional 401(k)

More Control

Compare Options


Reduced administrative costs.
Economies of scale.

Potentially higher administration costs than a PEP.


The Pooled Plan Provider (P3) significantly reduces plan set-up responsibilities, including contracting with vendors and the investment manager.

As plan sponsor, the employer is involved in set-up such as plan design, choosing investments, and coordinating with vendors.


The P3 is the Plan Sponsor and relieves the employer of significant fiduciary liability.

The employer has more control but also more fiduciary risk.


The P3 assumes responsibility for audits, potentially saving employers $10,000-$20,000.

The employer of a large plan must oversee and pay for costly audits.


May be eligible for up to $15,000 in tax credits over 3 years for new plans.

May be eligible for up to $15,000 in tax credits over 3 years for new plans.


Making State Reporting Easier with Integrated Payroll

If you decide on a state-run IRA, we can help there too. The state of California requires employers utilizing CalSavers to report payroll contributions each pay period. Partner with Paychex for your payroll, and we can automate the state reporting process through our integration with CalSavers. Not only does this simplify your payroll processing, it takes contribution reporting — which is required each pay period— off your hands, saving time and reducing the potential for errors. Paychex is one of the only leading payroll providers to offer this convenient service with your state.

And, when choosing Paychex for payroll today, you’ll have access to robust retirement options in the future — when you are ready.

We’ll do the hard work of switching payroll companies

Changing payroll companies can be a hassle — but when you switch to Paychex, it’s our pleasure. We have the know-how and experience to take care of everything involved with switching payroll companies, from working with you to collect the necessary paperwork to balancing your year-to-date payroll data.

We can even get you up and running in as little as 48 hours after signing up. Simply provide some necessary paperwork and info (federal ID number, employee bank accounts, etc.) and, as your new payroll provider, we’ll take care of setting up your account. To make things go even faster, we’re often able to help you pull your data directly from your previous payroll company's system.

Dedicated help every step of the way

Throughout the onboarding process you'll have a one-to-one service experience:

  • Sales representative will help you gather the necessary information.
  • Implementation specialist will audit back to the beginning of the year and process your first few payrolls for you.
  • Designated payroll specialist, who will be your one point of contact once you're fully onboarded, is 100 percent accountable to make sure you're taken care of.