California considers new retirement plan for workers without a pension or 401(k)
California is considering a state-run retirement plan for workers who don’t have a traditional pension or 401(k) plan available through their private employers.
The California Secure Choice Retirement Savings Trust Act would require employers who don’t offer retirement plans to withhold 3% of their workers’ wages and remit that money to the state, much like they collect income taxes.
California would invest the money as it does for public pension funds and offer participants a monthly retirement check based on how much they contributed to the plan over their working lives.
Businesses with as few as five workers would be required to take part, but it would cost them nothing to do so. There is no cost or obligation to the employer.
Taxpayers aren’t on the hook for anything, either.
The goal is to provide a second source of income to about 6 million, primarily low-income Californians who might otherwise have to depend on Social Security.
A recent study by the University of California at Berkeley estimates that more than half of the state’s private-sector employees between the ages of 25 and 64 worked for employers without any type of retirement plan.
About 56 million Americans are currently collecting Social Security, and the average monthly retirement benefit is a modest $1,235 -- or $14,820 a year.
Yet one-quarter of all married couples and nearly half of all single recipients rely on Social Security for 90% or more of their total income.
The proposal sailed through the California Senate and a couple of committees in the state assembly.
But the Los Angeles Times reported today that business groups are now mounting an all-out effort to stop the legislation.
Opponents say workers can get the same plans from banks, brokerages and insurance companies, according to the Times, and that 3% is too much to withhold from the paychecks of low-income workers.
You can learn more about the plan and the debate surrounding it on the Los Angeles Times website: http://www.latimes.com/business/la-fi-private-sector-retirement-20120807,0,453241,full.story