California has taken a step closer in instituting a state-run retirement plan.
The Los Angeles Times reports a state board Monday “sent a set of recommendations to the Legislature calling for the creation of the California Secure Choice Retirement Plan—essentially a 401(k) plan operated by the state and open to private-sector workers whose employers don’t offer a retirement savings plan.”
The paper said employees of any company with at least five workers would be eligible to participate. That would cover an estimated 6.8 million workers, about a third of California’s labor force.
The plan calls for eligible workers to be signed up automatically by their employers and have 2 percent to 5 percent of their wages invested in the plan, unless workers opt out.
“Business groups have questioned whether the plan could cost employers or make them liable for investment losses or other problems,” The Times notes. “But state officials have said the retirement plans would be similar to those available to many private-sector employees and, unlike pension plans for state workers, would not be funded or guaranteed by employers or taxpayers.”
According to the paper, retirement savings advocates “say the kind of state-run retirement accounts being considered by California and a handful of other states could help millions of Americans—especially lower-income workers, who are the least likely to save—put away at least a small retirement nest egg.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
