Last year, after a decade of effort, California enacted a bipartisan program offering millions of working people a shot at more retirement security.
California Secure Choice created a state-managed individual retirement account program for workers whose employers don’t offer pensions or 401(k) plans. That may sound mundane, but 6.8 million Californians – workers at car washes, dry cleaners, in-home supportive services, restaurants – simply don’t have access to the retirement plans that corporate and public sector employees take for granted.
It’s an ominous gap in the retirement system. More than 55 million workers nationally lack workplace retirement plans, and many of them face old age with little beyond a meager Social Security check.
So it was a minor triumph when California, with help from the U.S. Department of Labor, found a modest solution – one that not only helped the working poor salt away savings in IRAs, but that also satisfied businesses, taxpayer advocates and consumers.
Now House Republicans, in a rush to please Wall Street, are trying to kill this retirement program. The move is reprehensible and misinformed.
Congress should have passed a national version of Secure Choice long ago. But that won’t happen, not in these gridlocked times. That’s why the Obama administration’s Labor Department approved waivers last year to allow states to try to fill in the gaps in the system. California and about two dozen other states have passed or are considering state-facilitated retirement programs.
Most, like Secure Choice, require small businesses to automatically put a tiny percentage of each worker’s wagers into a low-cost retirement fund, unless they opt out. That’s to create economies of scale, and because studies show the chances a worker will save rise from about 20 percent to 90 percent with auto-enrollment.
In California, employers may choose between their own private program and the state fund. Private firms would manage the state fund, overseen by a state board. Employers help employees sign up or opt out; that’s the limit of their involvement. There should be no cost to the employers, or taxpayers.
Initially, business groups and fiscal hawks resisted, but as the measure evolved, they dropped their opposition. By the time Secure Choice was signed by Gov. Jerry Brown, its sole opponent was a mutual fund lobby worried about competition in a market it doesn’t serve.
Alas, the House Committee on Education and the Workforce has taken it upon itself to shred those waivers, essentially arguing that workers must be “protected” from plans that don’t involve the private sector. In other words, your savings aren’t safe unless Wall Street can rip you off.
They claim the new rules open savings to mismanagement; that businesses will dump existing plans if they can offer the state option; and that taxpayers might end up paying for fund losses. Although there always is some risk in investments, state consumer protections are strict, and employers with private plans would have no reason to drop them. And the program explicitly bans such a bailout.
But this Congress seems unwilling to let facts get in the way of good dogma – or a powerful lobby. Resolutions to kill the Obama waivers will come to the House floor this week, and are expected to pass under an arcane law that lets Congress nullify any federal regulation finalized since June, with President Donald Trump’s approval and without a public hearing.
If the Senate passes them, too, and Trump signs them, California could still go through with the program, but there would be a court fight. It’s outrageous, given how much work went into this plan.
And it raises an important question: If Republicans can’t agree to encourage the working poor to save for retirement, what are their priorities? Voters should put that question to California’s House Republicans.