A New Retirement Plan for 7 Million Californians—the Secure Choice Program (SB 1234)
7 million California workers who have no employer-provided retirement plan whatsoever will soon have a new pension program created by Senator Kevin DeLeon’s SB 1234, just signed by Governor Jerry Brown.
The law creates the California Secure Choice Retirement Program, a defined contribution mass IRA plan for any employee of an employer with 5 or more employees that does not offer a retirement plan of its own for employees.
Employees will be automatically included in the program unless they choose to “opt out.” The law provides that covered employers, starting with large employers, and over a few years, progressing to smaller and smaller employers, will automatically deduct 3% of an employee’s wages from each paycheck and forward them to the new Secure Choice Program, which will invest and set aside these assets for each covered employee for retirement. The Board of the Secure Choice Program can change this amount annually in a range from 2% to 5%, and workers will have the opportunity to “opt in” to a program that will allow employees to increase voluntary contributions all the way up to 8% of wages.
It will take a year or two to get the Secure Choice Program “up and running,” since the Board wants to take enough time to set this program up correctly. Because it is one of the first in the country, and certainly the largest, special care is being taken to make sure it is set up to be as efficient and low cost as possible, so that administration of the Secure Choice Program will cost no more than 1% of contributions each year.
Stay tuned for more news as the Secure Choice Program takes shape and begins to accept contributions.
By Bill Sokol | October 4, 2016