New legislation unveiled this morning aims to build a sort of CalPERS-for-all retirement savings system that the measure's author says could cover an estimated 7 million working Californians in the private sector.
Senate Bill 1234 by Los Angeles Democratic Sen. Kevin de León would require businesses with five or more employees to enroll them in a new "Personal Pension" defined benefit program or offer an alternative employer-sponsored plan.
De León, Senate President Pro Tem Darrell Steinberg and other political and labor leaders who touted the measure noted that public discourse has focused on public employee pensions.
The press event came one day after Republicans co-opted Brown's 12-point pension plan and offered it up as their own legislation. When asked if the Democrats were offering the bill hoping to relieve pressure on them to curb public pensions, Steinberg said, "Absolutely not."
The majority party is "committed to public pension reform. We're going to be analytical about it. We're not running away from it," Steinberg said, calling the de León bill the private-sector "bookend" to public pension reform.
"I hear a lot about 'pension envy,'" said Democratic Assemblyman Warren Furutani, who is co-chairing a joint public pension committee. And while many critics of the current system, including Gov. Jerry Brown, have called for reforms, Furutani said he sees many of those efforts as a misguided attempt to spread the private sector's retirement insecurity in the name of fairness.
"This bill turns that argument on its head," Furutani said.
Still, de León said his bill isn't intended to provide government-level benefits for the private sector. "It's a supplement," he said. "It's not a panacea."
The personal pension system's investments would be professionally managed by CalPERS or another contracted organization, de León said. Employees would contribute about 3 percent of their pay through a payroll deduction. Employers would not be required to provide matching contributions.
The fund would be managed "very conservatively," de León said, with investments tied to US Treasury bond rates.
Treasuries, considered among the safest investment vehicles, offer roughly half the 7.75 percent rate of return that CalPERS assumes on its investments.
Employees could opt out of the de León program or make contributions into a professionally managed fund that would offer a guaranteed return, de León said at a press event this morning.
Losses would be covered by private underwriters, not the state.
A panel operating under the State Treasurer's Office would oversee the proposed Golden State Retirement Savings Trust:. Members on the board would include the treasurer, the controller, the Finance Department director and two gubernatorial appointees. The Senate Rules Committee, and the Assembly speaker would get one appointment each.
The plan is contingent on money from a nonprofit or private entity or federal funding to launch the program.
Senate Bill 1234
PHOTO: Kevin de León. Sacramento Bee file, 2011 / Hector Amezcua