WASHINGTON--(BUSINESS WIRE)--The Secure Choice Pension plan unveiled by the National Conference on Public Employee Retirement Systems in 2011 has gained significant momentum with California’s enactment last week of breakthrough legislation to improve retirement security for private sector workers.
California joins 11 states and municipalities that have already adopted legislation inspired by the Secure Choice Pension proposal. Since 2012, at least 30 states have considered proposals to study or establish state-sponsored retirement savings plans for private sector employees.
NCPERS’ Secure Choice Pension white paper provided the model that states and municipalities have since used to create public-private partnerships to spur retirement savings by small-business employees. These partnerships extend the documented performance and efficiency of pooled and professional management of assets and public oversight to reduce fees for private-sector workers. President Obama gave the Secure Choice Pension approach a boost in 2015 when he ordered the Department of Labor to issue regulations to facilitate the creation of these public-private plans.
“Governor Brown has demonstrated foresight and determination in his drive to enhance retirement income security for Californians,” said Hank H. Kim, Esq., executive director and counsel of NCPERS, and author of the 2011 Secure Choice Pension white paper. “Americans are woefully unprepared financially for retirement, and initiatives like those of Governor Brown and other visionary leaders will be critical to keep millions of our citizens out of poverty in what should be their golden years.”
The California legislation, S. 1234, which Governor Brown signed into law Sept. 29, creates the California Secure Choice Retirement Savings Trust, a state-run retirement program. The program provides a workplace savings vehicle for nearly seven million Californians who currently lack access to a pension or other retirement savings plan at work.
Kim noted that research from multiple sources, including the National Institute on Retirement Security and the Employee Benefit Research Institute, shows a massive shortfall in retirement income for those currently employed. The EBRI last year pegged the gap between retirement income and expenses at $4.13 trillion among those currently between ages 25 and 64, while others have estimated as much as a $14 trillion shortfall.
The California law, which was sponsored by Senate President pro Tempore Kevin De León, provides that workers who do not have a workplace retirement plan will automatically contribute 3 percent of wages to a new retirement account, the California Secure Choice Retirement Savings Trust. This fund will invest in a diversified portfolio that focuses on long-term financial growth. Workers can opt out of the plan or change their contribution levels at any time. Enactment of the law followed two years of feasibility analysis by a board appointed by the Governor.
The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 500 funds throughout the United States and Canada. It is a unique non-profit network of public trustees, administrators, public officials and investment professionals who collectively manage more than $3 trillion in pension assets. Founded in 1941, NCPERS is the principal trade association working to promote and protect pensions by focusing on advocacy, research and education for the benefit of public sector pension stakeholders.