Democratic Senator Kevin DeLeon authored the bill.
He says more than seven million private sector employees don't have access to a retirement plan.
The legislation would allow three percent of workers' wages to automatically be deducted from their paychecks. Workers could opt out.
The bill also establishes a board to make sure it doesn't cost taxpayers money. DeLeon says last minute changes give the legislature final authorization.
DeLeon: "What I'm trying to do is make sure the taxpayer is not on the hook in the future. So this is more long term thinking. So when these folks do retire eventually we want to make sure they're not on public assistance, therefore on the taxpayer dole."
Republicans and the California Chamber of Commerce opposed the bill.