Social Security eliminated the ghost of poverty for the elderly-but as time passes, the system must change in order to be sustainable, reducing the purchasing power, especially given the increasingly longer life expectancy. That is why a retirement account that supplements retirement checks has become necessary.
Many private programs in California fulfill this mission and are within the reach of millions of people through their jobs. But that is not enough.
The UC Berkeley Labor Center found that there are 6.3 million people who work in companies that do not provide this benefit. They have low incomes, are mostly from minority groups and work for small businesses.
We think they should also have access to these accounts if they want to. Therefore, we hope Governor Brown signs SB 1234, a bill sponsored by Senator Kevin De Leon.
The Golden State Retirement Savings Trust Act will allow employers to withhold 3% of the pay of workers who want to participate. Of that money, 1% will be for administrative costs. The rest will go into an investment fund to be controlled by a board made up of financial officials, appointees with financial expertise and others representing small businesses, the public and employees.
One of the criticisms of this measure is that the government should not meddle in an already existent private retirement market. In reality, it is very possible that this will increase competition in the market, so employers have other options to provide their employees, other than the state fund.
The other aspect is the degree of responsibility that contributors will have regarding this retirement fund. The bill stipulates otherwise, but the lack of trust is understandable at a time when the public pension commitment is exerting great pressure on state expenses.
At any rate, the enactment of this law does not create an inflexible legal framework. On the contrary; the first step is a feasibility study of the program, which then will have to go back to the Legislature.
SB 1234 is a responsible bill that addresses a very large need that is still not covered. We hope it encourages competition, because a decent retirement after a lifetime of work can be good business for everyone involved. The process starts with the governor’s signature.