When you think of California as a trendsetter, retirement policy is
probably not the first thing that comes to mind, but that may soon
change.
A bill
recently passed by the California Legislature creates the foundation
for a savings plan to cover the state’s 6.3 million private-sector
employees who have no retirement coverage at work. The plan also could
serve as a model for addressing a national problem: Americans for the
most part are ill-prepared for retirement, either because they have
risky 401(k) plans or inadequate savings or no retirement coverage at
all.
Memo to Gov. Jerry Brown: Please sign this bill.
The new law is aimed at finding a way to cover the uncovered without the considerable expense and market risks inherent in 401(k)’s.
Specifically, the legislation calls for research to settle the technical
and legal issues that stand in the way of enacting a public-private
partnership that would be called the California Secure Choice Retirement
Savings Program. Eligible employees would have 3 percent of pay
deducted from their paychecks, unless they opted out. The employee
contributions would be pooled and conservatively managed by professional
investment managers chosen by the state through a bid process. That
could include private firms and the California Public Employees’
Retirement System, the big public pension manager. The program would be
overseen by a board of public and private sector leaders, appointed by
the governor and the Legislature.
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