One day after Republicans sided with Gov. Jerry Brown on public pension reform, Democrats on Thursday said they want millions of Californians to have guaranteed retirement benefits.
Senate Bill 1234, written by Sen. Kevin de León, D-Los Angeles, would require businesses with five or more employees to enroll them in a new "Personal Pension" defined benefit program or to offer an alternative employer-sponsored plan.
The new system's investments would be professionally managed by CalPERS or another contracted organization. Employees would contribute about 3 percent of their wages through a payroll deduction, although they could opt out of the plan. Employers could make voluntary contributions into the fund.
The fund would assume much lower investment returns than the 7.75 percent that the California Public Employees' Retirement System says its investments will generate, de León said.
Unlike public pension funds that can pass on their investment shortfalls to taxpayers, private underwriters would assume any losses by the private sector fund.
"It's a supplement to Social Security. It's not a panacea," de León said during a Thursday morning press event with Senate President Pro Tem Darrell Steinberg and other Democratic and labor leaders.
The UC Berkeley Center for Labor Research and Education figures about 62 percent of working Californians more than 7 million people have no retirement savings through their employer. If all of them put 3 percent of their wages into a retirement fund, the pot of money would grow to $6.6 billion in the first year, say university researchers.
The measure still has several details to work out, but assuming that money is deposited before being taxed, the state would lose some revenue but regain it later when the funds are withdrawn and spent in retirement.
A few years ago de León introduced similar savings jump-start legislation that would have put private sector workers into 401(k)-type savings plans instead of the fixed payments guaranteed in his new bill. Both sides of the aisle rejected it, he said.
De León rolled out his revised plan one day after Republicans co-opted Brown's 12-point pension reform plan and offered it up, word-for-word as their own legislation.
Steinberg rejected suggestions that Democrats are pushing de León's bill to fend off pressure to enact substantial public pension changes.
"Absolutely not. We're not running away from it," Steinberg said, calling de León's bill the private sector "bookend" to public pension reform measures he expects lawmakers will send to Brown before the current session ends.