In California, there are 6.3 million workers who face significant economic hardship in retirement simply because they do not have access to a retirement plan at their place of employment.
California State Senator Kevin DeLeon was very familiar with hardships faced by workers like his 74-year-old aunt Francisca who only manages to live above the poverty line as long as she’s able to continue working as a housekeeper. In an effort to help Californians working without access to an employer-sponsored retirement plan, he sponsored Senate Bill (SB) 1234, the California Secure Choice Retirement Savings Program, to create a voluntary retirement with guaranteed benefits.
In 2012, California lawmakers passed SB1234, with strong support from SEIU locals throughout California. Many SEIU Local 99 child care providers participated in this effort.
Most of us have friends and family members who don’t have access to a retirement plan at work. Indeed, many Local 99 members do not have access to a retirement plan through their employer. This bill is about making sure that every Californian can retire with dignity. Retirement should not be a “race to the bottom” that tears workers down, every worker should have an opportunity to prepare for retirement.
Let’s take a moment to look how the CA Secure Choice Retirement Savings Program works:
- The California Secure Choice Retirement Savings Program provides participants with low-cost, low-risk Individual Retirement Accounts (IRAs). The default contribution is 3 percent, which workers can increase, decrease, or opt out of.
- Secure Choice accounts are completely portable so workers can take their benefits from job to job.
- And when workers are ready to retire, the plan will provide low-cost annuities, so they will receive a monthly check for the rest of their life, just like a defined benefit pension.
The CA Secure Choice Retirement Savings Program has received a great deal of criticism from big business and the insurance industry. Much of this criticism is because these groups are unable to profit from this program. Although IRAs and 401(k)s can be purchased from some of these providers, the financial services industry has ignored low-wage workers and small business because they can’t make enough profit from such accounts.
Facts about SB 1234
- Secure Choice is about lifting all workers up so that every Californian can retire with dignity. The driving force behind this proposal is the retirement insecurity that millions of workers are facing because they don’t have an adequate retirement savings plan. There is a looming crisis in America for baby boomers who are nearing retirement age and younger workers who have no way to save for retirement, and no prospects for retirement income beyond Social Security.
- The plan to create the California Secure Choice Retirement Savings Program cannot move forward unless it’s self-sustaining. The cost of managing CalPERS investments is very low, less than 6/10ths of 1 percent per year.
- Only employees can contribute to their Secure Choice accounts so a business owner faces virtually no burden or cost to comply with SB 1234. Secure Choice deductions would be handled the same way an employer withholds FICA and other payroll deductions. In fact, California will be a more attractive place for small businesses because they will be able to offer workers a secure way to save for retirement.
Although the Secure Choice Program has been signed into law we still have a lot to do before workers can enroll in the California Secure Choice Retirement Savings Plan.
First, a Secure Choice board will conduct a feasibility study. This plan must also be cleared by the Federal Department of Labor and IRS before it goes back to the state legislature for final approval.
It’s critical that we remain involved in this process to ensure that all working people can retire with dignity. If you’d like to share your story on your concerns over retirement, contact us at communiations@seiu99.org.
