Democrats and Republicans lament the plight of the working poor. Now legislators have a golden opportunity to give those individuals a hand at minimum cost.
Through his Senate Bill 1234, Senate President Pro Tem Kevin de León proposes to provide people whose employers don’t provide pensions or a 401(k) with an easy way to squirrel away a little of the money they earn for the time when they can no longer work.
De León has been working on the idea for years, starting with a bill in 2012 to study the concept. With the study done, SB 1234 would begin implementing what he calls Secure Choice. The bill, which awaits a vote in the Assembly, would create a potentially far-reaching social program, with modest costs and limited risks.
Under the measure, individuals could establish individual retirement accounts to be overseen by a new California Secure Choice Retirement Savings Investment Board. Their money would be invested in U.S. Treasury bills, the safest investment this side of stashing money under your mattress. Whatever workers save through Secure Choice would supplement Social Security and other retirement savings they build during their working lives.
On Wednesday, acknowledging amendments spelling out the bill’s limits, the California Chamber of Commerce, the California Manufacturers & Technology Association and several other business groups dropped their opposition and now take no position on the bill.
Employers would be expected to provide workers with the paperwork to sign up. Beyond that, their responsibilities would be few. The amended bill specifically says employers are not responsible for providing any advice to employees, and that employers have zero liability for any decisions the employees make.
“This retirement program is not sponsored by the employer, and therefore the employer is not responsible for the plan or liable as a plan sponsor,” the bill says. At another point, the bill states: “An employer shall not bear responsibility for the administration, investment or investment performance of the program. An employer shall not be liable with regard to investment returns, program design and benefits paid to program participants.”
The legislation also makes clear that taxpayers are not on the hook if the investments sour.
If lawmakers approve it – and they should – the program would be phased in, starting with companies that have more than 100 employees, and expanding over time to businesses that employ five people or more. Workers can opt out of the program. It is purely voluntary. In fact, the bill repeats the term “opt-out” eight times.
The savings plan would be available to nonunion workers whose employers don’t provide a pension or retirement savings plan. Participants would include teenagers who take part-time jobs at fast-food restaurants, in-home supportive service workers, janitorial workers, farmworkers whose employer is a farm labor contractor, and many others. They’d be expected to sock away between 2 and 5 percent of their annual pay.
Secure Choice would not specifically cover independent contractors who work for, say, Uber. But those individuals could contribute part of their pay to their IRAs. Understanding that people find new jobs, the IRA would be portable, following workers as they move from job to job.
De León, a liberal Los Angeles Democrat, proposed the bill with his Aunt Francisca in mind. She worked a lifetime cleaning houses in La Jolla and tending to infirm people and never saved for retirement.
But this is a concept that ought to attract support from conservatives who seek to limit the size of government and appreciate the limitations of Social Security. Senate Bill 1234 would help wage earners help themselves, without giving them government handouts.