Pro Tem de Leon’s SB 1234 Creates Secure Choice Retirement Savings Program for Private-Sector Workers
SACRAMENTO – On Thursday, California Governor Jerry Brown will sign legislation to officially establish a first-of-its-kind retirement savings program for private-sector workers who do not have access to a savings plan at their workplace. Nearly 7 million California workers will be offered a portable and reliable retirement plan that serves as a vital supplement to Social Security, with participation encouraged through automatic enrollment and small payroll deductions with the option of opting out. SB 1234, authored by California Senate President pro Tempore Kevin de Leόn (D-Los Angeles), was recently recognized by the New York Times as legislation that shows “California is taking on the mantle of leadership” nationwide when it comes to retirement coverage.
Exactly four years ago today, California enacted legislation, SB 1234 (2012) (de Leόn-Steinberg), which established the California Secure Choice Retirement Savings Investment Board and since then oversaw the completion of a legal analysis and mandated market analysis and feasibility study to create a new retirement savings program for private-sector workers. SB 1234 (2016), which will be signed by Governor Brown on Thursday, will officially adopt the Board’s recommendations to the Legislature and allow the Board to move forward with the full implementation of the program, serving as the ongoing administrator for the hiring of private firms to manage the investment portfolio and the individual retirement savings accounts.
Since the enactment of the original SB 1234 in 2012, Pro Tem De Leόn and State Treasurer John Chiang have traveled to Washington, D.C. on numerous occasions to meet with White House officials, the U.S. Department of Labor, the U.S. Treasury Department, and key policymakers on Capitol Hill. As a result of this advocacy, in July 2015, President Barack Obama issued a directive to Secretary of Labor Thomas E. Perez to issue new regulations that provide states a clear pathway to launch retirement programs for private sector workers.
In California, nearly one-half of workers will face significant economic hardship in retirement, with incomes below 200% of the federal poverty threshold. The most at-risk groups are young workers ages 25-44 and low-income workers, but even middle-income workers will be at risk of not having enough retirement income to be self-sufficient. The lack of retirement savings affects all Californians, as seniors without sufficient savings will more likely need to rely on government assistance for basic necessities.
Social Security is the foundation of retirement income for the vast majority of retirees in California, but these payments alone, today averaging $1,341 per month, are not enough to sustain workers in retirement. Although Social Security has reduced the poverty rate among retirees in general, women and minorities are disproportionately represented among retirees living in poverty and among low-income retirees. In California, approximately two-thirds of the retirees living in poverty are women.
AARP and Small Business Majority released an opinion poll that revealed that two-thirds of small business owners in California support the creation of a state retirement savings program that would help small businesses and their employees save for retirement. In addition, nearly three-fourths (73%) of the respondents expressed the belief that offering such a program would give their business a competitive edge.
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