This weekend, Governor Jerry Brown signed the California Secure Choice Retirement Savings Program (SCRSP). The new law, SB 1234, establishes a VOLUNTARY pension program for California workers to assist them in supplementing their Social Security benefits which are arguably insufficient to support the financial needs of Californians once they retire.
A recent report by the University of California, Berkeley Center for Labor Research and Education found that more Californians are far behind workers in the rest of the nation, when it comes to retirement savings the analysis said:
- In California, 62 percent of private sector workers don’t participate in an employer-sponsored retirement plan, compared to 57 percent nationwide,
- And workers in smaller firms have less access to employer-sponsored retirement plans. In California, 84 percent working for firms with fewer than 25 workers don’t participate in a retirement plan at work.
Companies with more than five workers — which don’t already offer retirement plans to employees — will be required to participate. Employers would withhold 3 percent of each worker’s pay for safe keeping in the fund, unless the worker acts to opt out. The fund is essentially a state managed 401k plan for California Workers who do not currently have access to a similar plan operated by their employer.
The failure of workers to save for their retirement places a severe burden on the state when workers who have been unable to save, due to lack of access to an employer sponsored plan. This new law addresses the most significant barrier to retirement saving. Further, the plan, because it will be administered by the state, will provide California workers with a retirement savings plan that is easier to access, and less expensive than those available on the open market.
SCRSP provides that the state shall not have any liability for the payment of the retirement savings benefit earned by SCRSP participants. Any financial liability for the payment of benefits in excess of funds available shall be borne by entities with whom the Board contracts to provide an insurance, annuity, or other funding mechanism to protects the returns earned by SCRSP participants. The state, and any of the funds of the state, shall have no obligation for payment of the benefits arising from the SCRSP.