California has no equivalent credits. 100% of the pension start-up expenses the employer incurs would be deductible on the California return of the business, while the federal deduction is limited to the expenses less the credit amount. For a business that’s reported on the taxpayer’s personal income tax return (for example, on Schedule C), an adjustment will need to be made on Schedule CA to account for the expense differences.

Will employers’ costs associated with the state mandated CalSavers program be eligible for either of these federal credits? Probably not, since the plan is merely a Roth IRA and doesn’t fit the definition of an eligible employer plan. The CalSavers program is designed to minimize employers’ costs, so the amount of credit not allowed will likely be minimal.