Calif.
lawmakers OK private-sector retirement plan
By JUDY LIN Associated
PressAssociated
Press
Posted:
08/31/2012 11:57:09 PM PDT - San Jose Mercury News
SACRAMENTO,
Calif.—Democratic lawmakers on Friday approved a bill that
would create the nation's first state-run retirement program
for private-sector workers over the objection of Republicans
who said it creates a new liability for taxpayers.
The Senate sent SB1234 to Gov. Jerry Brown on a 25-13 vote
just before the Legislature's midnight deadline. The Assembly
approved the bill earlier in the day on a 44-24 vote.
Democratic supporters say the bill would establish the
California Secure Choice Retirement Savings Program for nearly
7 million low-income workers whose private employers don't
offer retirement plans.
According to the bill's author, Sen. Kevin de Leon, D-Los
Angeles, the program directs employers to withhold 3 percent
of their workers' pay unless the employee opts out of the
savings program. It would be administered by a seven-member
board chaired by the state treasurer.
Democrats said the program gives workers more savings
options, particularly women working low-paying jobs.
Supporters say it will not cost the state money because it
will be backed by underwriters.
But Republicans said they have too many questions about the
program and note that if the underwriter fails to meet
investment targets, taxpayers and employers could be held
responsible for covering investment losses and administrative
overhead.
"It's still troublesome that the measure would have the
government take over the retirement, insert itself into the retirement plans in the private sector here," said
Sen. Doug La Malfa, R-Willows. "For the state to be usurping
that responsibility from the private sector is really a giant
leap."
Assemblyman Tom Ammiano, D-San Francisco, defended the
bill, saying it sets up a fiscally responsible program. He
noted it would not be implemented unless the savings program
is exempt from federal rules that cover private-sector defined
benefit plans. Such plans have to meet minimum standards under
the federal Employee Retirement Income Security Act.
The bill also requires the board to submit an annual audit.
It is opposed by businesses, insurance companies and financial
services firms.
"I encourage you not to be fooled by the Wall Street
subterfuge," Ammiano said. "This is a responsible bill that
will be a tremendous benefit for working Californians."
Morrell said low-income workers might be better off
financially if they put after-tax earnings into a Roth IRA,
which would allow them to earn investments tax-free.
He also expressed concern that the fund could be
administered by the California Public Employees' Retirement
System. The state's largest pension fund posted an annual
return of just 1 percent last year, missing its own long-term
annual target of 7.5 percent.
"CalPERS is going to request to manage this money, and I
know they've done a pretty good job when the stock market was
booming, but the last few years they have not done very well
and that's another concern," Morrell said.
De Leon introduced the bill earlier this year in response
to what he called the "looming retirement tsunami" as millions
of low-wage workers face financial hardship in their
retirement years. He said the program would act as a
supplement to Social Security by offering private-sector
workers a portable savings plan with a guaranteed return.
"One of the most common myths being perpetrated about this
bill is that it creates a pension for private-sector workers,"
Ammiano said.
————
Associated Press writer Don Thompson contributed to this
story.