RELEASE: White House, Labor Department Clear Way for California Retirement Savings Program

New Order from President Obama Facilitates State Efforts to Provide Workplace-based Retirement Saving Opportunities

Monday, July 13, 2015

Today, at the White House Conference on Aging, President Obama announced he has directed the Labor Department to issue a rule that clarifies the path forward for state-based retirement savings initiatives, allowing for full implementation of California’s landmark Secure Choice Retirement Program.

Enacted in 2012 through the legislation authored by Senate President pro Tempore Kevin de León (SB 1234), the Secure Choice program recognizes the need to provide retirement security for the 6.3 million Californians in lower and middle-income private-sector jobs who have no access to a retirement plan. Secure Choice provides workers a portable and reliable retirement plan that serves as a vital supplement to Social Security, encouraging participation through automatic enrollment and small payroll deductions with the option of opting out.

During recent implementation of state-based programs, concerns have remained about a lack of clarity regarding preemption by a federal pension law called the Employee Retirement Income Security Act of 1974 (ERISA).  With today’s announcement, the White House has notified states that by the end of the year, the U.S. Department of Labor will publish a proposed rule clarifying how states can move forward, including with respect to requirements to automatically enroll employees and for employers to offer coverage.

“Recognizing that states are leading the way on retirement security, President Obama’s action removes the most signification barrier to state action across the country,” Senator De León said. “California and states that follow our lead will now be able to ensure tens of millions of hard-working men and women will have a shot at retiring with dignity.”

According to a fact sheet posted today by the White House, President Obama has put forth proposals to provide access for 30 million Americans to workplace-based retirement savings by requiring employers not currently offering a retirement plan to automatically enroll their workers in an IRA.  But in the absence of Congressional action, the states are leading the charge. Similar proposals have been passed by a few states and are under consideration in over 20 others.

In blog post by U.S. Department of Labor Secretary Tom Perez, he writes: “If the federal government can’t move the needle, then we have to do everything possible to encourage innovation that’s already happening at the state level.

Secretary Perez also explained the significance of today’s announcement: “The forthcoming guidance will safeguard worker retirement savings and offer pathways for states to adopt retirement savings programs that are consistent with federal law. This is a true win-win — workers get to build and grow a nest egg, while employers in those states are better able to attract and retain top-notch talent."

“We’ve been working with the Administration for over a year to clear any potential legal roadblocks to implementing California's Secure Choice program, today’s announcement proves our work has really paid off.”” Pro Tem De León recalls of his recent work on Secure Choice.

During his most recent visit to Washington, D.C., with the California State Treasurer John Chiang in March, the Pro Tem met with the California Congressional Delegation along with several administration officials, including Labor Secretary Perez and members of the White House Council of Economic Advisers to discuss implementation of SB 1234 and the Secure Choice program.

Following the visit, over 20 U.S. Senators wrote a letter to the Obama Administration urging them to take immediate action in helping facilitate state-based efforts to improve retirement security in the private sector.

A public-private partnership, the California Secure Choice Retirement Savings Program provides opportunities for private-sector workers who would otherwise have no access to employer-sponsored retirement plans. SB 1234 (De León), which created Secure Choice, has been called “a model for addressing a national problem” in an editorial by the New York Times (California Takes On the Retirement Crisis).