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Old 03-31-2017, 12:25 PM
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Mary Pat Campbell
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 87,013
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California don't care

Retirement savings for all? California vows to proceed despite new D.C. obstacle

California’s grand plan to extend retirement security to millions of workers, a cornerstone of the economic agenda put forward by state Democrats, is looking a little bit less secure.

That’s because Republicans in the U.S. Senate voted on Thursday to roll back a little-known Obama administration regulation, putting California’s “Secure Choice Retirement Savings Program” in jeopardy.
“We’re not going to throw in the towel,” Treasurer spokesperson, Marc Lifsher, said before the Thursday vote. “We’re going to press ahead—even if the Senate goes south on us and the whole thing probably ends up with the courts.”

That outcome is looking increasingly likely. Secure Choice has long been in the cross hairs of the financial services industry, which considers it an unwelcome intrusion of government into their business. Reversing the Obama-era rule that provided regulatory cover for the program makes an ultimate legal challenge all the more likely.

As devised by Senate President Pro Tem Kevin de León, California’s Secure Choice program would automatically enroll the approximately 6.8 million eligible workers into individual retirement accounts. Participating employees would see 3 percent of each paycheck placed into a state-wide coffer, which would be overseen by a board chaired by the State Treasurer, but managed by a private investment manager. Eligible workers will have the option to bow out of the program. But by placing all eligible participants into the program by default from the get-go, the program’s designers hope to provide the California workforce with a helpful nudge toward financial prudence.


ERISA (rhymes with “Marissa”) is meant to prevent employers from “using the pension plan as a cookie jar,” explains Bruce Wolk, a professor emeritus at the UC Davis School of Law and an expert on pension law. Thus, the law saddles employers with strict reporting requirements and places them on the legal and financial hook if anything should go wrong with the plan.

To get around ERISA—and the objections of business groups like the Chamber of Commerce—Sen. de León structured Secure Choice to ensure that federal regulators would not consider it an “employer pension benefit plan.” Namely, employers would not be asked to contribute to, accept money from, or endorse Secure Choice plans in anyway. Likewise, employee participation would be “completely voluntary.”


Under the Secure Choice program, eligible workers are automatically enrolled into the system, but given the option to opt out. It’s an idea that harnesses the widely-observed human tendency to go with the flow: Researchers have found that simply switching from a savings program that requires workers to proactively opt in to one where participation is set as the default can double the share of workers socking money away. Still, auto-enrollment is an ERISA red flag.

“What does ‘completely voluntary’ mean? Nobody knows,” says Wolk. “That was one of the reasons that everyone wanted the Department of Labor to issue a ruling.”


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