Yet another of California’s pie-in-the-sky ideas came a step closer to reality earlier this month.
Senate President Pro Tem Kevin de León came up with the notion of helping low-income workers provide for their retirement. He said he saw the need because his Aunt Francisca, who had spent a lifetime cleaning houses in San Diego, never made enough money to save for retirement.
Why couldn’t the state help, though not by kicking in money, a crucial element to the idea? Instead, the state would establish accounts like individual retirement accounts into which workers could pay, if their employers don’t provide 401(k) accounts.
The legislation, Senate Bill 1234 of 2012, established the Secure Choice Retirement Plan, though it required nothing beyond a privately funded study.
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Many hurdles remain. One is that de León’s notion appears to run afoul of the Employee Retirement Income Security Act of 1974. The complex federal law protects individuals who depend on employers’ retirement plans, but didn’t contemplate that states would be involved in pension plans for private workers.
On July 13, President Barack Obama directed that Labor Secretary Tom Perez propose a regulation by the end of the year “clarifying how states can move forward, including with respect to requirements to automatically enroll employees and for employers to offer coverage.”
De León and state delegations met with Perez and labor officials several times leading up to the president’s announcement. Obama had urged Congress to tackle the issue, without success.
As many as 6.3 California workers whose employers don’t provide retirement plans could affected by the Secure Choice Retirement Plan.
About 30 million workers lack access to workplace retirement plans nationally. In California, De León estimates 6.3 million workers could be affected.
The details will be refined by further study and additional legislation next year. But as currently envisioned, workers would contribute 3 percent of their pay to the state-run plans, unless they opt out. Professional money managers would invest the money, and a board appointed by the governor and the Legislature would oversee the program.
The 50 states are supposed to function as laboratories that experiment with different policy. No state experiments on a grander scale than California, which can be good and not so good.
De León’s idea is exactly the sort of public-interest effort states should undertake, given Congress’ failure. Obama is right to help force the federal government to get out of the way.
Aunt Francisca, meanwhile, is in her middle 70s, suffered a stroke awhile back and can no longer work. Her family, including de León, helps support her.