SB 1234: Retirement savings plans.

Existing federal law provides for tax-qualified retirement plans and individual retirement accounts or individual retirement annuities by which private citizens may save money for retirement. Existing law, the California Secure Choice Retirement Savings Trust Act, establishes the California Secure Choice Retirement Savings Program, administered by the California Secure Choice Retirement Savings Investment Board, contingent on specified funding and interest criteria being met. Existing law prescribes the composition of the board and its duties and provides that it acts as trustee in entering contracts and accepting moneys, among other things. Existing law prohibits the board from permitting enrollment in the program until enactment of a statute expressing legislative approval of program implementation. The program requires specified eligible employers, as defined, to offer a payroll deposit retirement savings arrangement and requires eligible employees, as defined, who do not opt out of the program, to contribute a portion of their salary or wages to a retirement savings account in the program, as specified. Existing law requires contributions from the wages of employees participating in the program to be deposited in the California Secure Choice Retirement Savings Trust, which is continuously appropriated and administered by the board. Existing law authorizes the board to adjust the employee contribution amount between 2% and 4%, inclusive, of the employees annual salary or wages, as specified.

This bill would express legislative approval of the program and its implementation on January 1, 2017. The bill would require the board, prior to opening the program for enrollment, to make a report to the Governor and Legislature affirming that certain requirements have been met, including that the program is structured to meet a United States Department of Labor regulation, as specified. The bill would require the board to design and implement the program and would prescribe certain parameters that the board is to consider and utilize in establishing the design. The bill would require the board, for up to 3 years following implementation, to establish managed accounts invested in United States Treasury securities, in myRAs, as defined, or in similar investments and would make conforming changes in this connection in provisions related to mitigating risk in the investment portfolio and payment of the costs of administration. The bill would require the board, after this period, to annually prepare and adopt a written statement of investment policy containing specified elements. The bill would require the board to consider the statement and any changes in the investment policy at a public hearing. The bill would specify that funding and first year administrative costs may be appropriated in the annual budget from the General Fund and would require the board to repay the amount appropriated, plus interest, as specified. On and after 6 years from the date the program is implemented, the bill would prohibit expenditures for the purpose of paying operative costs and administering the trust from exceeding 1% of the total program fund. The bill would revise the purposes for which administrative and program funds may be expended. The bill would provide that investment policy decisions, including asset allocation and investment options, are entrusted to the board as a fiduciary, and would revise certain principles that the board is to consider in connection with investment policy. The bill would exempt the California Secure Choice Retirement Savings Trust from specified provisions regarding the qualification of securities for sale.

The bill would make various changes to existing duties of the board, including those regarding dissemination of information and the entities with which the board is to collaborate and cooperate. The bill would require the Treasurer to appoint an executive director of the board, to serve at its pleasure, and to determine the duties of the office and its compensation. The bill would eliminate the duty of the board to ensure that insurance or some other mechanism is in place to protect the value of individual accounts and would eliminate the requirement to secure private underwriting and reinsurance, as specified. The bill would repeal the duty of the board to conduct an initial market analysis to determine if the condition for the implementation of the program can be met and associated provisions. The bill would eliminate the authority of the board to establish certain investment options.

This bill would require eligible employers that do not offer specified retirement plans or accounts to have a payroll deposit retirement savings arrangement so that employees may participate in the program within specified time periods based on the number of eligible employees that the employer has, and the bill would authorize the board to extend these time periods. The bill would provide that employers retain the right at all times to set up and offer their own qualified retirement plans. The bill would define an employer of a provider of in-home supportive services as an employer if a specified determination and certification are made and would require the state or a county that makes a direct payment to a provider to assume obligations regarding retirement savings accounts, including payroll deposit IRA arrangements offered under the program. The bill would authorize the board to adjust the employee contribution amount described above up to 5% and would prescribe other limits on increasing employee contributions. The bill would authorize the board to make annual, automatic escalations of employee contributions subject to certain limitations, including that the employee may opt out, as specified. By authorizing the board to increase moneys that are deposited into the California Secure Choice Retirement Savings Trust, which is continuously appropriated, the bill would make an appropriation. The bill would authorize the board to adopt regulations to implement the program and would provide that the adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency. The bill would make various conforming changes.