The program directs employers to withhold 3 percent of their workers' pay unless the employee opts out of the savings program, which can be done every two years. It would be administered by a seven-member board chaired by the state treasurer. The board would select a professional fund manager, which could be a private investment firm or the state's public pension system, to maintain the money.The way things are going, I'm not so sure I'd want to "invest" with other public emlpoyees in California...
State Sen. Kevin De Leon, D-Los Angeles, introduced the bill earlier this year in response to what he called the "looming retirement tsunami" as millions of lower-wage workers face financial hardship in their retirement years. He said the program will act as a supplement to Social Security by offering private-sector workers a portable savings plan with a guaranteed return.
He said the program is not a pension but rather acts as a savings account, which could be a national model for improving retirement savings.
"This is a major step forward for retirement security in America," De Leon said in a statement. "I am grateful for Gov. Brown's acumen and with his leadership we are setting the path for middle class hard-working Americas to prepare for retirement so they won't be forced into poverty."
State Sen. Mimi Walters, R-Lake Forest, called SB1234 the "worst bill to make its way out of the legislature this year" because it would allow the state's main pension system to invest the money.
Walters noted that the California Public Employees' Retirement System is running a shortfall and that the savings program will be controlled by a group of "career politicians."
"SB1234 looks like nothing more than a cynical effort to prop up the floundering public employee pension debt with new funds from private investors," Walters wrote in a blog ahead of the bill signing.
Many cities and counties already pool their contributions along with the state in the public pension system, but taxpayers are on the hook to cover public employee benefits if investment projections fall short.
It's too soon to say what would happen if CalPERS managed the new retirement program, said pension fund's spokesman, Brad Pacheco. CalPERS could create a separate account for private-sector workers, although it's more likely to pool investments with public employees.
Saturday, September 29, 2012
The Golden State Retirement Plan
Are you ready to trust the state of California with your retirement money?