California to Initiate a State-Run Retirement Plan

August 28, 2016

The California lawmakers would probably pass a new bill in a few days in which a new state-run retirement plan would be given a nod. This plan will help all those people in California who have got no access to a retirement plan from their employer. The plan would be managed by a board that will make low-risk investments. The employers with more than 5 workers would be required to participate in the plan and the workers would automatically get enrolled in this program.

Who will Benefit from this State-Run Retirement Plan?

It is being estimated that more than 7.5 million residents of California would benefit from this state-run retirement plan because they do not have access to a good employer sponsored retirement savings plan right now. About two-thirds of the aforementioned numbers of people are employed at a business that has less than 100 workers at present.

Who will Manage the Plan?

The retirement plan would be managed by a board, the California Secure Choice Retirement Savings Investment Board that was established in 2012. It has state officials and political appointees as its staff members.

Expected Investments

It is being predicted that the state-run plan would invest in low-risk debt securities such as Treasurys until the board develops more investment options for all the participants.

The Key Details

If the plan proposal is approved by the lawmakers, all the employers who have hired over 5 workers and do not offer a retirement savings plan would be required to be a member of the state-run plan. The workers of these employers would be automatically enrolled and they will have the choice regarding opting out of the plan. It is estimated that 3 percent of the workers’ salaries would be contributed to the plan and the contribution limits would be same as those of IRAs.

The Support

The bill is supported by many people including a senior legislative representative with AARP (an advocacy group for older Americans), Sarah Gill. She believes that the bill would soon become a law. She also said that the program would pay for itself in the future and small business owners would want to give some retirement security to their employees. She added that there is bipartisan support for bills like this and the state-run retirement plan was a conservative idea which was developed by the Heritage Foundation.