New California Secure Choice Pension Fund, One Big Step Closer
In 2012, Governor Brown signed SB1234, which called for a study to determine whether a new defined contribution Retirement Trust Fund should be created for the 7 million Californians working in the private sector who have no employer retirement plan whatsoever. The law called for the creation of a Board which would study the situation, and report back to the Legislature with recommendations on this emerging crisis.
On March 28, 2016, the Board delivered its official Report to the Legislature. The Report describes this crisis—the fact that millions of Californians will retire into poverty if something is not done. It goes on to urge the Legislature to create a new California Secure Choice Retirement Fund, a defined contribution IRA Fund, which would call for voluntary “opt out” auto-enrollment of every private sector employee in California who works for an employer of five or more employees that does not provide some kind of retirement plan for its employees.
After enrollment, a percentage of weekly pay (from 1% to 10% as decided by the Board) would automatically be deducted and sent into the new Fund where it would be invested in long term secure investments.
Much still remains to be determined about the precise structure and procedures of the Fund. The Legislature, under the direction of Speaker of the Senate Pro Tem Kevin de Leon, will launch a bill at hearings on April 22, and there is a timeline which provides that a bill may hit the Governor’s desk sometime in July. If the proposal from the Board makes it through all these “hoops,” then those 7 million Californians will have the chance to save for retirement. This Fund would be one more step towards a secure future, and combined with a strengthened Social Security system, it can assure millions of Californians a secure, safe retirement with respect and dignity.
By Bill Sokol | April 11, 2016