The Legislature has approved a bill (SB 1234) that would require certain California businesses that do not offer retirement plans to join a state-run retirement program, U-T San Diego reports.
The bill has been sent to Gov. Jerry Brown (D) for consideration.
A study released this summer by researchers at the UC-Berkeley Labor Center found that 6.3 million California residents work for a private employer that does not sponsor a retirement plan.
The report states, "Without significant policy intervention to improve the retirement income security of private sector workers, California will face a serious elder poverty crisis in the coming decades."
It adds, "This will not only put retirees in serious hardship and increase financial demands on their families, it will also increase the need for subsidies and publicly funded services, exerting strain on the state budget."
The bill -- sponsored by Sens. Kevin De Leon (D-Los Angeles) and Darrell Steinberg (D-Sacramento) -- would create a state-run retirement program and require all private companies that have more than five employees that do not offer retirement plans to join the program.
The legislation would guarantee workers a return on their investment.
According to the bill, the retirement trust would be administered by a seven-person panel, which would be chaired by the state treasurer and include the state controller, finance director and several appointees.
The program would be developed after a feasibility study takes place.
Reactions to Bill
Democrats and some labor groups have praised the bill as a critical step to protecting low-income workers who often do not have access to private retirement plans.
Christie Hill -- senior policy adviser for the Center for Policy Initiatives -- said, "All workers should be able to retire with dignity and security," adding, "All employers have that responsibility to their workers, and SB 1234 recognizes and meets this responsibility."
However, Republicans, business groups and insurers have argued that the bill duplicates private-sector retirement services and potentially leaves taxpayers and employers responsible for pension shortfalls.
Lani Lutar, president of the San Diego County Taxpayers Association, said, "There is absolutely no reason California has to establish a new state-run pension system when the state can't support its existing services" (Burgin, U-T San Diego, 9/8).