SB 1234 Takes a Historic Step in Meeting the Crisis of Aging Californians Without Retirement Savings
SACRAMENTO -- The Senate today sent Governor Brown a landmark measure by California Senate President pro Tempore Kevin de León (D-Los Angeles) that launches a retirement-security program for nearly 7 million private-sector workers in California who are currently without one.
The Senate’s approval of the California Secure Retirement Savings Program, SB 1234, by a bipartisan vote of 27-12 caps a six-year effort by Senator de León who worked with the Obama administration to make way for this first-of-its-kind state plan.
The Secure Choice retirement program encourages workers to save through small, automatic deductions from their paychecks with no financial risk to the state, California taxpayers, or employers.
“Regardless of socioeconomic status, the hard-working people of California who have made our state a global economic powerhouse deserve a measure of financial security in their Golden Years,” said Senator de León. “This will benefit our current workers and younger generations who will finally have an easy and reliable way to save for the future.”
California State Treasurer John Chiang, who chairs the California Secure Choice Retirement Savings Investment Board, said that SB 1234 will help California’s elderly workers avoid a retirement filled with financial uncertainty.
“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,” said Treasurer Chiang.
“Once signed into law,” he added, “SB 1234 will set in motion an ambitious plan that will hopefully protect many future retirees from today’s all-too-real scenario of whether to spend their meager retirement draw on food or rent.”
A broad coalition including AARP, labor unions, non-profits, and chambers of commerce supported SB 1234. The bill now heads to the Governor for his signature.
In the News:
From the New York Times Editorial Board:
“At any given moment, about half of the private-sector employees in the United States — some 60 million people — do not have any type of employer-sponsored retirement plan. The result is a growing American underclass, in which a third of current retirees live almost entirely on Social Security and fully half of future retirees will face reduced standards of living. Worse, the coverage gap has long proved intractable, with Congress and the financial industry unable or unwilling to design or support truly simple and low-cost retirement savings plans.”
From the Los Angeles Times Editorial Board:
The Secure Choice savings program would create individual retirement accounts for up to roughly 7 million workers in California at companies with five or more employees that do not offer a pension, 401(k) plan or similar retirement benefits. Workers would initially contribute 3% of their wages, and a state board could gradually increase the rate to 8%. Their IRAs would stay with them if they changed jobs, and they could opt out at any time (even at the beginning). As with other IRAs, they could face a tax penalty if they tapped the money before they retired.
Most of those eligible for the program would be low- to moderate-wage workers […] And so the savings a worker would accumulate through Secure Choice would probably be modest […] But when added to Social Security benefits, the money would help keep more retirees out of poverty and off public support. More than 1 in 5 California seniors lives in poverty, according to the Census Bureau’s Supplemental Poverty Measure — the worst rate in the country. And the ranks of the impoverished retirees in California have grown dramatically over the last 15 years, according to the Sacramento Bee.
From the Sacramento Bee Editorial Board:
Through his Senate Bill 1234, Senate President Pro Tem Kevin de León proposes to provide people whose employers don’t provide pensions or a 401(k) with an easy way to squirrel away a little of the money they earn for the time when they can no longer work.
Under the measure, individuals could establish individual retirement accounts to be overseen by a new California Secure Choice Retirement Savings Investment Board. Their money would be invested in U.S. Treasury bills, the safest investment this side of stashing money under your mattress. Whatever workers save through Secure Choice would supplement Social Security and other retirement savings they build during their working lives.
The savings plan would be available to nonunion workers whose employers don’t provide a pension or retirement savings plan. Participants would include teenagers who take part-time jobs at fast-food restaurants, in-home supportive service workers, janitorial workers, farmworkers whose employer is a farm labor contractor, and many others. They’d be expected to sock away between 2 and 5 percent of their annual pay.
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