OT: California Secure Choice Retirement Savings Program

[blake]

California Secure Choice Retirement Savings Program

SACRAMENTO, Calif. — Opponents of a bill that would create the nation’s first state-run retirement program for private-sector workers testified Wednesday that California taxpayers cannot afford to take on the potential for billions of dollars in new liabilities at a time when the state’s public pension systems already are facing massive shortfalls.

Businesses, insurance companies and financial services firms criticized SB1234 by Democratic Sen. Kevin De Leon of Los Angeles. His bill would establish the California Secure Choice Retirement Savings Program for nearly 7 million low-income workers whose private employers don’t offer retirement plans.

The bill’s fate was uncertain after it was held by the Assembly Appropriations Committee. It had earlier passed the Senate, where it had the backing of the Senate leader, President Pro Tem Darrell Steinberg, D-Sacramento.

“We all know that markets are volatile, and if the projections that are associated with the investment returns of this program come up short, then the state or the employer will be on the hook for the shortfall,” said Nicole Rice, representing the California Manufacturers and Technology Association. “I don’t think it’s a stretch of the imagination to acknowledge this fact given that we currently have an outstanding pension debt that we owe to public employees at the tune of billions of dollars.”

The California Public Employees’ Retirement System posted a 1 percent return on its investments last fiscal year, well below its long-term annual target of 7.5 percent. The current long-term unfunded liability for CalPERS is estimated at about $85 billion, and the California State Teachers’ Retirement System is short by about $64.5 billion.

Rice added that California also faces billions of dollars in projected budget shortfalls.

De Leon introduced the bill earlier this year in response to what he called the “looming retirement tsunami” as millions of low-wage workers face financial hardship in their retirement years. He says the program would act as a supplement to Social Security by offering private-sector workers a portable savings plan with a guaranteed return.

“SB1234 is not a traditional pension,” De Leon said. “It is not a defined benefit plan as we know today where you combine experience or years of service, the employee contribution along with the employer match.”

De Leon’s bill would require employers to withhold 3 percent of their workers’ pay. The program would be administered by a seven-member board chaired by the state treasurer.

The Securities Industry and Financial Markets Association and other opponents say workers whose employers don’t offer 401(k) accounts already can establish low-cost private retirement accounts, such as traditional IRAs, Roth IRAs and other savings plans.

The bill passed the Senate in May and needs approval from the Assembly before heading to Gov. Jerry Brown, who has not taken a position.

Assemblyman Jim Nielsen, R-Gerber, cautioned small business owners not to compromise quickly. “This could be a very serious mistake for you,” Nielsen said.

De Leon said California taxpayers are protected and the program won’t proceed unless an initial market analysis determines the program is feasible. He said the state won’t be at risk because the program will be protected by insurance underwriters if earnings fall short of the retirement benefits guaranteed to workers.

Brown’s finance advisers aren’t so sure. An analysis by the governor’s Finance Department raised concerns about the high cost of administering the program and the risk to taxpayers if investments fail to meet the benefits promised to workers.

Even if the state sponsors the plan, opponents say the businesses that employ participating workers could be held financially responsible. That’s because all private-sector defined benefit plans have to meet minimum standards under the federal Employee Retirement Income Security Act, or ERISA.

If the federal law applied to the program, which opponents believe it does, employers could be expected to pay some or all of any unfunded liabilities should investment returns fail to cover the guaranteed rate of return and administrative overhead. De Leon acknowledged that regulatory and tax hurdles remain.

[Anonymous]

Needless to say, this is a horrible piece of legislation.

And another clear example of why we shouldn’t simply pick a “side” (Dem vs. GOP) when voting for policy or politicians.

In the CA legislature, the Dems are by far the most responsible for the fiscal mess.

At the federal level, the situation isn’t so simple.

[Coronita]

Brilliant…Motivation for CA businesses to move elsewhere.

I love it.

[no_such_reality]

I can imagine the mandatory additional paperwork I’d have to file and mandatory contributions I’d have to make for the nanny we have employed.

That’s basically the real target, nannies, house-cleaners, etc.

Net result would be even more under the table employment of illegal labor.

Frankly, I have a proposal for them, enforce the employment laws on the books today.

[The-Shoveler]

“The California Public Employees’ Retirement System posted a 1 percent return on its investments last fiscal year, well below its long-term annual target of 7.5 percent. The current long-term unfunded liability for CalPERS is estimated at about $85 billion, and the California State Teachers’ Retirement System is short by about $64.5 billion.
Rice added that California also faces billions of dollars in projected budget shortfalls.”

This puts this about 36% unfunded currently

We would already need long term inflation to be between 6-8% to get beyond the current slow motion train wreck.

this is the true ultimate extend and pretend.

Maybe Poway knows what its doing after all.

[EconProf]

Yet one more reason to leave California.

[briansd1]

[quote=EconProf]Yet one more reason to leave California.[/quote]

What? And leave all the wonderful weather behind?

There’s always Nevada where there are no state income taxes.

New York is one the highest taxed places. But there are plenty of billionaires there. Steve Wynn bought a $70 million apartment over there.

[bearishgurl]

Given all that our “esteemed” Legislature is dealing with at the present, I don’t think this will go anywhere. Small biz doesn’t need GOV oversight to manage a pension plan for its employees. It’s a waste of taxpayer $$ that we don’t have. There are PLENTY of firms in and out of state that will manage a small biz pension plan and even make it portable for the employees to take elsewhere!

In March 2014, when the next phase of the HCRA kicks in, ALL employees, regardless of health or who they work for, will have access to a *reasonably priced* health plan. This, combined with a “portable” retirement plan, will make a lot of small-biz employees virtually “free-agents.” Employees will then not be married to an employer they don’t want to work for anymore so this can only be good.

[ucodegen]

[quote=briansd1][quote=EconProf]Yet one more reason to leave California.[/quote]

What? And leave all the wonderful weather behind?

There’s always Nevada where there are no state income taxes.

New York is one the highest taxed places. But there are plenty of billionaires there. Steve Wynn bought a $70 million apartment over there.[/quote]True.. but his income is sourced in Nevada and he spends most of his time in Nevada.. which is officially is place of residence. This means that he does not get bit by most of NY taxes. It is probably one of those.. nice to visit but wouldn’t want to live there. He could also be speculating in high priced NY RealEstate…

[paramount]

None of this really matters as long as the dollar is the world’s reserve currency.

We can and have been printing our way out of any fiscal difficulties.

The stock market is in a strong rally.

All of these proposals would be a big problem for most other countries, but not the US.

[Author]

Posts