Correction: Private Sector Retirement story

Associated Press Modified: October 1, 2012 at 4:01 pm •  Published: October 1, 2012
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SACRAMENTO, Calif. (AP) — In a story Sept. 28 about a state-run retirement program for private-sector workers in California, The Associated Press reported erroneously that the California Secure Choice Retirement Savings Program would be administered by a seven-member board. The board actually would have nine members.

Also, companion legislation signed by Gov. Jerry Brown requires another vote in the Legislature before the program can be implemented and participants can be enrolled.

A corrected version of the story is below:

Calif. creates state-run private retirement plan

Brown signs bill to create first state-run retirement savings plan for private-sector workers

By JUDY LIN

Associated Press

SACRAMENTO, Calif. (AP) — California Gov. Jerry Brown signed legislation Friday that will create the nation's first state-administered retirement savings program for private-sector workers, over the objection of critics who said it creates a new liability for taxpayers.

The bill, SB1234, will establish the California Secure Choice Retirement Savings Program for more than 6 million lower-income, private-sector workers whose employers do not offer retirement plans.

The program directs employers to withhold 3 percent of their workers' pay unless the employee opts out of the savings program, which can be done every two years. It would be administered by a nine-member board chaired by the state treasurer. The board would select a professional fund manager, which could be a private investment firm or the state's public pension system, to maintain the money.

The governor also signed companion legislation under SB923 that prevents the program from enrolling workers unless the Legislature gives authorization for the program to be fully implemented.

State Sen. Kevin De Leon, D-Los Angeles, introduced the bill earlier this year in response to what he called the "looming retirement tsunami" as millions of lower-wage workers face financial hardship in their retirement years. He said the program will act as a supplement to Social Security by offering private-sector workers a portable savings plan with a guaranteed return.

He said the program is not a pension but rather acts as a savings account, which could be a national model for improving retirement savings.

"This is a major step forward for retirement security in America," De Leon said in a statement. "I am grateful for Gov. Brown's acumen and with his leadership we are setting the path for middle class hard-working Americas to prepare for retirement so they won't be forced into poverty."

State Sen. Mimi Walters, R-Lake Forest, called SB1234 the "worst bill to make its way out of the legislature this year" because it would allow the state's main pension system to invest the money.

Walters noted that the California Public Employees' Retirement System is running a shortfall and that the savings program will be controlled by a group of "career politicians."