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SB 1234, by Senator Kevin De León (D, Los Angeles), passed the California State Senate with a vote of 23-13 last week.
SB 1234 would create a state administered retirement savings program for employees who lack access to an employer-provided retirement plan to be known as the California Secure Choice Retirement Savings Program. Employers with five or more employees will be required to offer the new retirement savings program to all employees according to a phase-in schedule. Employees will be required to opt out if they decline participation.
The author reported that private employees who make less than $50,000 a year usually do not participate in the market and retirement packages. This bill, he said, would "try to create savings for this population. This is a population that is the most vulnerable. This is a population that has been ignored by Wall Street and the private sector financial services."
However, the bill received resistance from both sides of the isle.
"It's one of the most dangerous pieces of legislation I've ever seen," said Senator Ted Lieu (D-Torrance). Lieu said he was concerned that if the retirement plan failed to make money, funds might be taken out of the state's general fund. Although the bill explicitly prohibits that, he did not think this would hold up in court.
"There are paths for savings that can reach our goal without putting us in fiscal peril as a state," said Sen. Ted Gaines, R-Rocklin.
"Nobody is wishing ill on any worker in California, whether a public or private employee, but we are having a hard time making ends meet, and we should focus on the real world today," added Sen. Joel Anderson, R-Alpine.
Senator De Leon, in meetings with interested parties, has said he will continue to work with opponents to address concerns relative to ERISA. He also said he is open to looking at different types of retirement products, such as annuities, that would be exempted from ERISA requirements.
The bill is currently awaiting committee assignment in the Assembly. It is expected to be referred to the Assembly Public Employees, Retirement & Social Security Committee. There is a chance it could be double referred, but the most likely stopping point would be the Assembly Appropriations Committee due to the cost of implementation.