Gino DiCaro

Pension program for private sector signed by governor

By Gino DiCaro, VP, Communications

Capitol Update, Oct. 5, 2012

Governor Jerry Brown signed two measures that will create the first state-mandated pension program for private sector employees – SB 1234 and its companion bill SB 923, both authored by Senator Kevin de Leon (D-Los Angeles). While SB 1234 still contains provisions that are objectionable to employers, the last minute amendments incorporated into SB 923 gives employers and the state time to determine their liability exposure before the program is fully implemented, a concept that was heavily lobbied for by CMTA and others.

SB 1234 is an extremely complicated piece of legislation with unknown consequences. It creates a state-run retirement savings program and requires employers with five or more employees, who do not offer their own retirement plan, to enroll their workers into this plan or be subject to a $250 penalty per employee. The bill was amended several times during the course of the legislative session but none of the changes fully addressed our concerns; more often than not, they actually raised new ones. In the end, one concern proved persuasive enough to prompt legislative action – the ability of the program’s political board to independently decide whether to move forward with the program, without further review or input from the Legislature. During the final hours of session, SB 923, an open vehicle, was amended and double-joined to SB 1234 to address this concern by requiring the Legislature to take a second look at and approve the program prior to its full implementation. 
What does this mean for employers? There are a lot of boxes that need to be checked before we will be required to perform under this bill. The board needs to be appointed, the market feasibility study needs to be completed, and the ERISA and IRS tax-deferral determinations need to be made. Then the Legislature, after reviewing the results of these actions, must pass a subsequent statute giving their approval for the program’s full implementation. By our best estimate, it will be several years before employers will have to comply. Hopefully by that time, our questions and concerns will be addressed.
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