State payroll retirement plan withholdings for automatic IRAs are back in the news. Congress is weighing in on recent regulation changes that seem to have occurred without the guidance of any recent and corresponding federal legislation. Now, states that are wishing to implement these types of plans are reacting. This may impact California’s new Secure Choice program.
I know that this may be a MEGO item (My Eyes Glaze Over), but allow me to get into the weeds.
You can also watch my speech in opposition to the final version of the SB 1234 here, so I will not repeat all of the reasons for my opposition. But, establishing yet another department in Sacramento, which has some 137 of them, seems a tad crazy. Especially when many of the others are inefficient and require expensive labor costs. But, when the private sector is doing this function already, who needs another state bureaucracy?
I have a robust legislative package this year, providing up to the maximum 20 bills allowed per year, which were submitted by the deadline. I am also allowed to present a State Constitutional Amendment anytime during the Session. SCA 1 is one of several that we’ve already submitted that is mentioned in the Calpension piece below. For an introduction to SCA 1, check out the video below.
In a nutshell, I want to prevent the State of California from being on the hook for guaranteeing a minimum investment return or guaranteeing against investment losses. Why? While some language safeguarding taxpayer funds was included in the original bill, there is nothing prohibiting a future legislature from changing the law — and increasing taxpayer liabilities for private sector retirement systems — by a simple majority vote. Making this change in the constitution provides for some additional protections and would give the taxpayer the final say on whether the state should be covering future losses in the 401k market.
Here is the text of SCA 1.
The bill was picked up by CalPensions.com here:
A proposed state constitutional amendment, SCA 1 by Sen. John Moorlach, R-Costa Mesa, would prohibit the state from incurring liability for Secure Choice benefit payments and bar state general funds for Secure Choice after the startup and first-year administrative costs.