Bill Helps Address Massive Personal Retirement Savings Deficit
SACRAMENTO, CA – Addressing the looming “retirement tsunami” represented by the massive shortfall pending in most people’s retirement, Senator Kevin de León (D-Los Angeles), Senate President Pro Tempore Darrell Steinberg (D-Sacramento), and Chair of the Assembly, Public Employees, Retirement and Social Security Committee, Warren Furutani (D-South Los Angeles County), today unveiled Senate Bill 1234 (SB1234) the California Retirement Savings Act, which creates a comprehensive retirement savings plan for the seven million private sector workers without access to a workplace retirement plan.
“California threatens to become home to a sea of discarded seniors unless we wake up and address the looming retirement tsunami,” said Senator De León referencing the $600 billion personal retirement savings deficit in the state. “This bill allows people to take personal responsibility for their own retirement without a cost to taxpayers helping us avoid potentially catastrophic conditions in California.” According to experts, nearly 50% of middle-income Californians will retire at or near poverty given present conditions.
California workers in the private sector need a lifelong retirement savings system that provides them with the opportunity to build their assets and achieve financial stability in retirement. SB1234 would provide a vital supplement to Social Security income and pool employee and employer contributions into a professionally-managed retirement fund that leverages economies of scale to offer portable, efficient, low-cost defined benefit retirement plans. If workers contributed just 3% of their earnings towards a retirement fund, the fund would generate an estimated $6.6 billion in the first year alone.
“We should be doing all we can to help all workers in both the public and private sector have an opportunity for a secure retirement,” said Senate Pro Tem Darrell Steinberg. “For millions of Californians now working without a retirement plan, this proposal can provide a better financial future as a safe, low-cost supplement to their Social Security and personal savings.”
Assemblymember Warren T. Furutani emphasized, “As Chair of the Pension Reform Conference Committee, I’ve been working diligently in addressing the issues of pensions for public employees, but retirement security and pensions are critical to all and should be available to private sector employees as well. Senator De León’s bill is a good step in the right direction. Retirement security and pensions are as American as apple pie.” His sentiments were echoed by AARP of California President David Pacheco, who said, “This is a critical step towards providing all Californians an easy, low-cost way to save for their retirement.”
The bill is also being hailed by small business owners, who are challenged to offer any type of retirement plan because existing offerings are too costly or burdensome. “My employees aren’t in a position to actively seek out ways to set up a retirement plan,” said Andrew Blaskovich, owner of Drewski’s Hot Rod Kitchen, which is a popular mobile food truck in Sacramento. “This makes it easy for them and helps me take care of them in a simple yet responsible way.”
SB1234 establishes the Golden State Retirement Savings Investment Board under the State Treasurer’s office. It directs the board to conduct a market analysis and then establish a Personal Pension program that offers cash balance pension plans for all seven million Californians currently without a workplace retirement savings plan. Employees would have the ability to opt out but employers would be required to enroll their employees.
Jon Hamm, CEO of the CA Association of Highway Patrolmen declared, “This bill addresses what we have been avoiding for way too long, ‘What do we do with our aging population that is approaching retirement age and is now discovering they have far too little to live on?’” Hamm continued, “Senator De León’s legislation offers substantial efficiencies to both the employers and employees that will increase benefits at no increased cost to either party, but added security for the working family. This is a no brainer.”
"We strongly support the efforts of Senator de León to find solutions to the looming crisis facing many Californians trying to create financial security in their retirement years,” said Gary Passmore, Vice President and Director, Congress of California Seniors.
A fact sheet on about the bill is available below for downloads. Five nationally-recognized retirement savings experts are available for interviews.
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