MOORLACH UPDATE — New Government Program? — September 16, 2016

I introduced you to SB 1234 in MOORLACH UPDATE — April Fools’ Day — April 1, 2016 april 1, 2016 john moorlach. I lamented that: "This will be another onerous obligation on our job producers. And another incentive to join the underground economy, further eroding our honest business community participants.

The Sacramento Bee gave me the opportunity to opine against this bill last month in MOORLACH UPDATE — SB 1234 — August 26, 2016 august 26, 2016 john moorlach.

And I included SB 1234 in the list of bills that Governor Brown should veto in MOORLACH UPDATE — 2016 Veto Worthy Bills — September 12, 2016 september 12, 2016 john moorlach.

SB 1234 is still awaiting a decision and is sitting on the Governor’s desk. Capitol Weekly provides its perspective in the piece below.

As a Certified Public Accountant and a Certified Financial Planner for most of my career, I am totally supportive of individuals setting funds aside for their retirement. In fact, I would strongly urge every one of my friends to purchase George Clason’s legendary book of some ninety years, "The Richest Man in Babylon," as a motivator on this subject.

But, as someone that has spent more than two decades in the public sector, I am loathe to have it do what the private sector can do much, much better. Instead of establishing a new state department, I would give financial incentives to employers to provide defined contribution retirement plans. Unfortunately, the state of California, a massive bureaucracy with the largest unrestricted net deficit in the nation on its balance sheet, is demanding new withholding and reporting requirements from small business owners. And don’t get me started on customer service for when participants have an inquiry or request.

I am concerned that people who should know better are selling this program as a retirement elixir for private sector workers and are intentionally confusing it with a defined benefit program (which government employees receive), which it is not. Who is going to tell the 60 year old who retires in 5 years that their return on this program so late in their career is not going to be a big payout? And who is going to tell the 50 year old in 10 years that the program is unstable or there are other costs and demands on the program that require higher contributions to cover those costs?

SB 1234 came up for a concurrence vote on the Senate Floor a couple of hours before Session concluded. I stood up and stated that, among many other problems, this state-run concept had the same potential slippery slide that the Social Security system has endured (see

When President Franklin D. Roosevelt introduced Social Security it was voluntary. It was minimal. It was invested in a separate trust fund. And, because it was not deductible going in, it would not be taxable going out. Subsequent (Democrat) Presidents made sad changes to Social Security. President Johnson merged the Trust Fund with the General Fund, and spent it. And President Clinton made 85 percent of the benefits taxable. In short, don’t let the government have your hard earned tax dollars to manage and invest.

BONUS: A status update on the 2016 Veto Worthy Bills is provided below the Capitol Weekly piece.

DOUBLE BONUS: My November Ballot Measure recommendations will be provided in my next UPDATE.

‘Portable’ pensions: Historic changes loom


In a decision that could serve as a national model, Gov. Jerry Brown is considering legislation to allow millions of private-sector employees to steadily build their pensions without interruption — even when they change jobs.

The program, called Secure Choice, would be one of the country’s few state-run, automatic and portable retirement fund for private employees and could directly affect some seven million California workers. California is one of eight states that have passed similar legislation – the others are Connecticut, Illinois, Maryland, New Jersey, Oregon, Massachusetts, and Washington – and the California version is viewed as one of the most comprehensive.

Despite the apparent need for the program, however, the move has been a long time coming in California.

“People are expected to bear much of the risk of retirement savings themselves and many don’t have access [to savings programs],” said Grant Boyken, executive director of the Secure Choice Investment Board. “The outlook for subsequent generations is even worse.”

The new plan, in which employees initially invest 2 percent to 5 percent of their pay in a low-risk retirement account, is intended to resolve what many experts describe as an impending crisis in workers’ savings. The pensions would be administered by a nine-person board that includes the state treasurer and controller, as well as small-business representatives, employers, employees and financial services experts.

Gov. Brown has until the end of September to decide whether to veto Secure Choice, sign it or let it become law without his signature.

Despite the apparent need for the program, however, the move has been a long time coming in California.

The bill is SB 1234, by Senate Leader Kevin de León, D-San Diego, who has long sought the pension changes. As a member of the Assembly in 2008, he introduced the first legislation dealing with the issue, making him one of the first legislators in the nation to attempt a state-supervised retirement program. That bill died in a Senate committee.

About 6.8 million Californians would be eligible for the state-run program.

Four years later, De León – now in the Senate — sponsored the first version of SB 1234, which established the Secure Choice board, chaired by Treasurer John Chiang.

Once the board was created and ordered to conduct a feasibility study, there were still obstacles. The 2012 bill ensured that the state would not be liable for any costs associated with the program, including the feasibility study. It took two years for the board to raise the $1 million needed to research the program’s costs and impact.

Those findings were substantial.

According to figures from AARP, about 7.5 million Californians currently work for employers that do not offer a retirement plan and, according to Boyken, about 6.8 million Californians would be eligible for the state-run program.

According to the Employment Development Department, there were about 19.2 million workers in the civilian labor force, as of July.

“As you and I talk, there are approximately 7 million people in the state of California who have no employer-provided retirement plan whatsoever,” said Bill Sokol, a lawyer and expert in labor issues. Sokol serves on the Secure Choice Board as one of the governor’s appointees.

According to Sokol and Boyken, the fact that the state-run account would be automatic means a great deal in providing for those millions of private-sector employees who have no retirement plan. Figures from the Secure Choice feasibility study estimate that programs where employees ‘opt-in’ see participation rates of about 15 percent.

“While people should save for their post-employment years, government should not be in the business of mandating retirement savings.” — John Moorlach

If Gov. Brown signs the bill, employees would have the opportunity to initially invest up to 5 percent of their paycheck in a low-risk retirement fund, and the amount could increase to 8 percent over time, at the worker’s request. The program covers employers with more than five employees that don’t already offer retirement programs.

SB 32 (Pavley) More Unnecessary Costs to Mandate Greenhouse Gases Signed
AB 197 (E. Garcia) More Unnecessary Costs to Mandate Greenhouse Gases Signed
SB 1234 (De Leon) The California Mandated Retirement Plan On Gov’s Desk
SB 1146 (Lara) Restricting Religious Liberty in Higher Education On Gov’s Desk
AB 1887 (Low) State Government Travel Bans On Gov’s Desk
SB 959 (Lara) Restrictions on University of California Spending On Gov’s Desk
AB 1066 (Gonzalez) More Overtime Pay = Less Agricultural Workers Signed
AB 1671 (Gomez) Killing the Whistleblower On Gov’s Desk
AB 1843 (M. Stone) Hiding Applicant’s’ Criminal History from Potential Employers On Gov’s Desk
SB 654 (Jackson) Government Dictated Expanded Family Leave On Gov’s Desk
SB 1107 (Allen) Forced Public Campaign Financing Signed
AB 1926 (Cooper) Prevailing Wages for Non-Working Apprentices On Gov’s Desk
AB 2153 (C. Garcia) A Battery of Taxes On Gov’s Desk
AB 2492 (Alejo) Redevelopment 2.0 On Gov’s Desk
AB 2748 (Gatto) The Lawsuit that Never Ends On Gov’s Desk
AB 1889 (Mullin) High-Speed Robbery On Gov’s Desk
SB 1000 (Leyva) Adding Environmental Justice Requirements to General Plans On Gov’s Desk
AB 1550 (Gomez) Empty Funding Promises to Disadvantaged Communities On Gov’s Desk
AB 2722 (Burke) Empty Funding Promises to Disadvantaged Communities On Gov’s Desk
SB 1078 (Jackson) Eliminate Arbitrators & Increase Court Backlog On Gov’s Desk
SB 1094 (E. Hernandez) More Burden to Citizens, but with Union Exemption On Gov’s Desk
SB 1167 (Mendoza) Overheating Employers for Hot Workers On Gov’s Desk
SB 1241 (Wieckowski) More Red Tape for Employment Contracts On Gov’s Desk
AB 1685 (Gomez) Heavy Fines for Selling Unapproved Cars On Gov’s Desk
SB 1383 (Lara) Air Pollution Judge, Jury & Executioner On Gov’s Desk
AB 2792 (Bonta) Handcuffing Law Enforcement of Illegal Immigrants On Gov’s Desk
AB 2466 (Weber) County Jail Polling Booths On Gov’s Desk

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