Gov. Brown OKs state-run retirement plan

Starting around 2018, most workers in California will be automatically enrolled in a private retirement account run by the state.

Through a legislative measure, signed into law by Gov. Jerry Brown on Thursday, most workers in the state who don’t have access to an employer-provided retirement plan will automatically join the Secure Choice Retirement Savings Trust through their work, although employees can opt out.

Senate President Pro Tempore Kevin de León, who championed the bill, argued that while anyone already has the option of enrolling in a private account, many are not. 

“With today’s action, California is providing workers a new chance to achieve better retirement security,” the Los Angeles Democrat said in a statement. “Secure Choice will empower younger generations, working families, and the women who lead them, and help provide the financial security they have earned for the later years of their life.”

Workers will be able to contribute to their account as much of their salaries as they choose, although the default will be 3 percent initially. The accounts will be held in mostly low-risk investments, like treasury bills, with a focus on long-term financial growth. 

The legislation also has provisions to block the state and employers from incurring any liabilities associated with the new program. However, critics are unconvinced that enough safeguards are in place.

“You can anticipate that this ‘secure’ investment has the potential to morph into a massive boondoggle and may become more expensive in meeting investor expectations during the inevitable next economic downturn,” said Sen. John Moorlach, R-Costa Mesa, a certified public accountant and certified financial planner. “SB1234 has no provision from using taxpayer funds to go towards a bail out.” 

The program would be administered by a nine-member California Secure Choice Retirement Savings Investment Board, which is chaired by the state treasurer.

According to a treasurer spokesman, the program will begin being phased in in three years, depending on the number of employees a business has, starting sometime in 2018.