In August, we took a look at state-run retirement options in several states (read State-Run Retirement Options in the Works), and over the next few weeks we’ll be taking a more in-depth look at each state’s plans, starting with the Golden State, California.
California was the first state to establish a board dedicated to retirement savings, with the California Secure Choice Retirement Savings Investment Board established in 2012. Since then, the board has studied retirement options and on March 28, 2016, gave its recommendations to the Legislature. These have resulted in SB 1234, which will create the California Secure Choice Retirement Savings Program if it passes, potentially becoming law in January 2017.
The California Secure Choice Retirement Savings Investment Board made the following recommendations to be included in SB 1234:
- Establish managed accounts that would be invested in U.S. Treasuries for the first three years of the program while developing investment options that address risk-sharing and smoothing of market losses and gain at inception
- Conduct an annual peer review to compare the California Secure Choice funds with similar funds on performance and fees
- Seek to minimize participant fees
- Implement program features that provide maximum possible income replacement in an IRA-based environment, including establishing an automatic default contribution rate of between 2% and 5%, with possible auto-escalation up to 10% of salary with flexibility for employees
- Include quasi-private workers to be enrolled if found legally permissible
- Develop a communication and education campaign for both employers and employees
- Determine default payout method to retirees
- Clarify “ministerial duties” expected of employers in the implementation of the program
- Determine necessary administrative costs including those associated with outreach, customer service, enforcement, staffing, and consultant costs
- Structure the Program to ensure that the state is prohibited from incurring liabilities
Watch Treasurer Chiang and Senator De Leon at a press conference talking about the Board’s unanimous vote to more forward with the program on March 28, 2016.