Private sector employee pension system proposed

By CMTA Staff

Capitol Update, March 2, 2012 Share this on FacebookTweet thisEmail this to a friend

Senator Kevin De Leon (D-Los Angeles) has introduced a measure requiring employers with more than five employees to provide their workers with retirement or pension plan options. Business owners would be required to provide employer-sponsored retirement and pension-type plans to employees, or allow workers to opt-out and enroll in a private pension plan managed by the state.

The bill, SB 1234, would create the new private system by establishing the Golden State Retirement Savings Trust. Overseeing the trust would be a new state bureaucracy, the Golden State Retirement Savings Investment Board.  The new system would require participating employees to contribute at least three percent of their wages to the fund; employers would be allowed to make voluntary contributions. According to reports, an estimated $6.6 billion would be generated by employee contributions during the Fund’s first year if all employees, currently without a retirement or pension plan in place, participate.  Investments would be managed either by CalPERS – the agency currently managing public employee pensions – or by an independent company.

Reports suggest De Leon’s measure was introduced in direct response to Legislative Republicans supporting Governor Jerry Brown’s 12-point pension reform plan which they took verbatim and formally introduced through legislation last week. Critics and skeptics of SB 1234 claim Democrats should be introducing legislation to address the issues currently plaguing the public employee pension system instead of creating costly new state bureaucracies and regulations. In response, Senate President pro Tempore Darrell Steinberg (D-Sacramento) stated that Democrats plan to introduce legislation outlining a plan for public pension reform and that SB 1234 is just one piece of a larger reform package.

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