Nicole Rice

Secure Choice implementation plan heads to Governor

By Nicole Rice, Policy Director, Government Relations

Capitol Update, Sept. 9, 2016

California moves one step closer to establishing a government-sponsored retirement savings program for private sector workers. SB 1234 (Kevin de León, D-Los Angeles), which happens to be the same bill number as the originating legislation in 2012, successfully navigated the legislative process and is before Governor Brown for consideration.

The Secure Choice Retirement Savings Trust Act (Secure Choice) will require employers with five or more employees who do not offer a specified type of retirement savings vehicle to automatically enroll their workers into this government-administered program or be subject to penalty.

States are generally prohibited by federal law from offering such retirement benefits to those employed in the private sector. However, in response to a presidential executive order, the United States Department of Labor (US DOL) has created a “safe harbor” that will allow these programs to operate without being subject to the Employee Retirement Income Security Act of 1974, better known as ERISA.

Even if the Governor signs SB 1234, there still remains much work to do through the regulatory process before employee enrollment can begin. Based on amendments secured by CMTA and others, the Secure Choice Board must certify to the Governor and Legislature that it has met several “prerequisites” before the program enactment. 

For example, the Board must report that Secure Choice meets the criteria of the US DOL “safe harbor” guidelines, mentioned above. Further, because this is not an employer-sponsored retirement plan, the Board must demonstrate that it has clearly defined the role and responsibilities of employers, so not to subject them to ERISA liability, and that it has developed an operational model that limits the amount of direction and interaction employers will be required to provide employees concerning the program.

CMTA also worked with the author on language to clarify his intent that employers’ liability should be limited to the responsibilities mandated under the program. Consequently, the measure states that employers bear no responsibility for investment decisions of employees or investment performance of the program and are not fiduciaries of the program. Additionally, if Secure Choice, and other plans like it, are subsequently determined to be prohibited under federal law, despite the “safe harbor,” employers will not be viewed as plan sponsors and found to be responsible the plans.

CMTA will remain active in the continued construction of the Secure Choice program to ensure manufacturers’ cost, liability and administrative burden are minimized. You can get more information here or you can contact Nicole Rice at nrice@cmta.net.

Read more Labor & Employment articles

Capitol updates archive 989898989