California Senate passes Secure Choice bill; governor expected to sign
By Randy Diamond - Pensions & Investments September 1, 2016 3:53 pm | Updated
The California Senate has given final legislative approval to implement the
state's Secure Choice retirement savings program for private-sector employees
who lack access to a workplace plan.
Gov. Edmund G. Brown Jr. is expected to sign the bill. The governor has 30
days to act on the legislation that was passed Wednesday.
State Treasurer John Chiang, who oversees the California Secure Choice
Retirement Savings Investment Board, in a statement Thursday hailed the passage
of the legislation, saying it will provide “millions of Californians with
greater protection from an impoverished retirement.”
“Secure Choice is the most significant step forward toward the goal of
providing all Californians with a dignified retirement since the establishment
of Social Security in 1935,” Mr. Chiang added.
The program requires employers with five or more employees to automatically
enroll participants in an individual retirement account with an initial default
contribution rate of 3% that could rise over time. Employees can choose to opt
out of the plan.
Secure Choice does have critics, including the Investment Company Institute,
which has argued it might be too costly to run.
So far, seven other states have approved legislation creating a retirement
program and many states are considering it. Proposals for a national plan have
stalled in Congress.
The California plan calls for employee contributions to be put in safe
investments, such as Treasuries, for the first three years of the program, while
an investment manager is chosen. After the manager's hiring, a broader range of
investments are expected to be offered.
The legislation calls for the program to begin in January 2017, but Marc
Lifsher, a spokesman for Mr. Chiang, said in an e-mail that it could be delayed
until 2018.
“It's a possibility,” Mr. Lifsher said. “We don't know how long it will take
to get this up and running correctly.”