Retirement savings options have expanded beyond traditional employer-sponsored 401(k) plans. One such initiative is CalSavers, a state-run retirement savings program aimed at providing a retirement savings option for workers in California. But is CalSavers a 401(k)? 

That’s a common query you will hear from most people. CalSavers and 401(k) are often confused together and many consumers fail to differentiate them.

In this comprehensive guide, we’ll delve into all you need to know about CalSavers, its similarities and differences with 401(k) plans, and the benefits of enrolling in this retirement savings program.

What is CalSavers?

Like a 401(k) plan, CalSavers is a retirement savings plan just like a 401(k) but it is different in some aspects.

CalSavers is a state-sponsored retirement savings program designed to address the retirement savings gap among private-sector workers in California.

It was established in response to the growing concern over the lack of access to employer-sponsored retirement plans, particularly among small businesses and employees in industries with lower rates of retirement plan coverage.

How Does CalSavers Work?

CalSavers operates as an automatic enrollment payroll deduction IRA (Individual Retirement Account) program. Employers who do not offer an employer-sponsored retirement plan and have five or more employees must facilitate CalSavers for their employees. However, smaller employers with fewer than five employees can voluntarily participate.

Under CalSavers, eligible employees are automatically enrolled in the program unless they choose to opt-out. Contributions are made through payroll deductions and deposited into individual IRAs managed by private financial firms selected by the California Secure Choice Retirement Savings Investment Board, which oversees the program.

Is CalSavers a 401(k)? – Know the Difference

While CalSavers shares some similarities with traditional 401(k) plans, there are several key differences that distinguish the two retirement savings options:

Program Sponsorship

Unlike 401(k) plans, which are sponsored by employers, CalSavers is a state-run program initiated by legislation. Employers’ role in CalSavers is primarily administrative, as they facilitate employee enrollment and payroll deductions.

Other than that, employers don’t have any role in managing the CalSavers program for the employees.

Plan Administration – Is CalSavers a 401(k)?

While 401(k) plans typically involve plan administrators chosen by the employer, CalSavers relies on a board-appointed financial services firm to manage the IRAs and investments on behalf of participants.

Investment Options

401(k) plans often offer a range of investment options, including stocks, bonds, mutual funds, and target-date funds. 

In contrast, CalSavers offers a limited selection of investment options, primarily consisting of low-cost index funds.

Employer Contributions

In a traditional 401(k) plan, employers may choose to match employee contributions up to a certain percentage of their salary. 

However, CalSavers does not involve employer contributions; instead, it relies solely on employee contributions.

Regulatory Oversight

Is CalSavers a 401(k)? CalSavers and 401(k) share the same purpose but are managed differently.

While both CalSavers and 401(k) plans are subject to regulatory oversight, CalSavers is governed by California state law, whereas 401(k) plans are regulated by federal laws such as the Employee Retirement Income Security Act (ERISA).

Similarities between CalSavers and 401(k) Plans

Despite the above-mentioned differences, CalSavers shares some similarities with 401(k) plans:

Tax Advantages

Like traditional 401(k) plans, contributions to CalSavers are made on a pre-tax basis, reducing participants’ taxable income and potentially lowering their tax liability. That is one of the topmost benefits that make CalSavers a better option to opt-in.

Automatic Enrollment

CalSavers, like some 401(k) plans, features automatic enrollment, encouraging participation among eligible employees who may not otherwise save for retirement.

The automatic enrollment process has its benefits and proves vital in the long run.


Both CalSavers IRAs and 401(k) accounts offer portability, allowing participants to retain their retirement savings when changing jobs or retiring.

Rollover Options

Participants in both CalSavers and 401(k) plans have the option to roll over their retirement savings into another eligible retirement account if they leave their employer or the program.

Benefits of CalSavers – Is CalSavers a 401(k)?

Increased Access to Retirement Savings

CalSavers addresses the retirement savings gap by providing a retirement savings option for employees whose employers do not offer a retirement plan.

Automatic Enrollment

The automatic enrollment feature of CalSavers encourages retirement savings participation among workers who may otherwise procrastinate or overlook saving for retirement.

Low-Cost Investment Options

CalSavers offers participants access to low-cost index funds, which can help maximize investment returns by minimizing fees and expenses.

Considerations for Participants

Limited Investment Options

While CalSavers provides access to low-cost index funds, participants may have limited control over their investment choices compared to traditional 401(k) plans, which offer a broader range of investment options.

No Employer Contributions

Is CalSavers a 401(k)? No, it is different in terms of employer contributions. Unlike 401(k) plans that may include employer matching contributions, CalSavers relies solely on employee contributions, potentially impacting the overall growth of retirement savings over time.

Regulatory Environment

Participants should be aware of the regulatory framework governing CalSavers and how it differs from federal regulations governing traditional 401(k) plans, particularly regarding participant protections and fiduciary responsibilities.

CalSavers or 401(k) – Keynotes

In summary, while CalSavers shares some similarities with traditional 401(k) plans, it is not a 401(k) in the traditional sense. 

CalSavers is a state-run retirement savings program designed to provide a retirement savings option for employees without access to employer-sponsored plans. 

Understanding the differences and similarities between CalSavers and 401(k) plans is essential for employees seeking to make informed decisions about their retirement savings strategy.

Ultimately, whether CalSavers or a 401(k) plan is the right choice depends on individual circumstances, investment preferences, and long-term financial goals.