The National Conference on Public Employee Retirement Systems has petitioned California Governor Edmund Brown to sign SB 1234, the California Secure Choice Retirement Savings Program, into law.
In his letter to the governor, Hank Kim, executive director and counsel for the organization, pointed out that many private-sector employers in California would like to offer an at-work retirement savings plan to employees, but most can’t afford to do so.
“Millions of California workers are not in a retirement savings plan—the vast majority because there is no plan available to them. The current situation has profound implications for individual financial security in retirement, for small business growth and competitiveness, for the state’s future safety-net liabilities, for future tax revenues and for long-term economic stability and growth,” the letter said.
According to the letter, 7.4 million private sector workers do not have access to a retirement savings plan, and of those who do, 1 million people still do not participate. The majority of these 8.4 million workers are lower-wage workers who work at companies with fewer than 25 employees.
“Nationally, the retirement savings deficit is estimated to be upwards of $8 trillion spanning a period of both near and further term retirees. With just a modest retirement arrangement such as California Secure Choice Retirement Savings Program, workers contributing just 3 percent of salary into the plan, would annually accumulate an estimated $6.6 billion toward retirement savings. This program could turn around the prospect of having ill-prepared retirees impact the state’s economy through increased demand for safety-net programs, a reduction in the tax base and commensurate revenue losses,” the letter said.
The proposed plan would allow smaller employers to offer employees a modest, cost-effective, professionally managed retirement savings option through a simple payroll deduction. The plan and its assets would be leverage the power of group purchasing to keep administrative costs low.
“If just half of those eligible to participate in California Secure Choice Retirement Savings Program earn a retirement benefit it is believed that the tax revenue for the state over a 30-year period would be significant. In addition, pressure on safety net programs will be far less; revenues would be higher; all resulting in a stronger state economy,” the organization stated.
The plan would be funded through employee contributions and taxpayers would not have to pay a cent toward the program.