Calif. creates state-run private retirement plan

[Live and Learn]

Source: Associated Press

SACRAMENTO, Calif. (AP) — California Gov. Jerry Brown signed legislation Friday that will create the nation's first state-administered retirement savings program for private-sector workers, over the objection of critics who said it creates a new liability for taxpayers.

The bill will establish the California Secure Choice Retirement Savings Program for more than 6 million lower-income, private-sector workers whose employers do not offer retirement plans.

The program directs employers to withhold 3 percent of their workers' pay unless the employee opts out of the savings program, which can be done every two years. It would be administered by a seven-member board chaired by the state treasurer. The board would select a professional fund manager, which could be a private investment firm or the state's public pension system, to maintain the money.

State Sen. Kevin De Leon, D-Los Angeles, introduced the bill earlier this year in response to what he called the "looming retirement tsunami" as millions of lower-wage workers face financial hardship in their retirement years. He said the program will act as a supplement to Social Security by offering private-sector workers a portable savings plan with a guaranteed return.

Read more: http://news.yahoo.com/calif-creates-state-run-private-retirement-plan-232409988--finance.html

[SunSeeker]

1. Everyone should have access to a retirement savings program.

Particularly one that deducts the savings pre-tax right out of your paycheck. There is no liability to taxpayers if the workers pay for it. Insurance actuaries know how much to charge based on the amount of the guaranteed payout and life expectancies. We should have had this long ago.

[LarryNM]

2. Good 1st Step Toward a National Pension/Trust n/t

[lovuian]

6. I like it if it is regulated

and the trustees manage it properly in safe investments

[nopoliticlpropaganda]

3. Good and bad , it is a step but safety nets MUST ultimately be govt responsability

We live in. A fantasy world in our economics. But in the real world crashes happen and even currencies eventually do crash as well. Any citizen oriented safeguard, like SS must always be a firm *government* responsability.

For an example one need only look at what happened in Russia. Their currency had a severe adjustment. It was awful for them, but because pensions were government backed, they retooled and softened the situation significantly and kept the pension. System running, likely saving hundreds of thousands of lives. Imagine... in Russia most Everyone ad a guaranteed apartment or home, which was instrumental in surviving. In this country it would be far worse when millions of poor elderly lost their homes and non elderly lost jobs if there is no. Government responsability not just to run the program, but to provide for it in emergencies.

[valerief]

4. Can low-wage earners afford to give up 3% of their pay? nt

[Live and Learn]

5. More information regarding the Bill from a NY Times editorial:

California Takes On the Retirement Crisis
Published: September 22, 2012
http://www.nytimes.com/2012/09/23/opinion/sunday/california-takes-on-the-retirement-crisis.html?_r=0

One of the advantages of the plan is that pooled contributions and professional management would reduce administrative costs and investing mistakes, which would boost returns beyond what most 401(k) investors achieve on their own.

The plan also calls for a guaranteed minimum return, via private insurance and reserves. That would be expensive, so the guarantee would likely be very modest, but it would ensure that all participants ended up with something, without requiring taxpayers to incur the risk of making good on investments gone bad.

Most of the opposition has come from the financial industry, undoubtedly because the plan would be a better deal than many of the retirement products they have on offer. Of course, they do not put it that way.

Instead, criticism has linked the new system to public pensions, which have been widely criticized as fiscally irresponsible. The connection is misleading. The new plan is essentially an automatic individual retirement account, with improvements including professional management, not a traditional pension. Nor is the plan entirely novel. Rather, it is akin to the successful annuity fund offered to colleges and nonprofits, and to several international retirement systems.