Bill Text: CA SB1234 | 2011-2012 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Retirement savings plans.

Spectrum: Partisan Bill (Democrat 11-0)

Status: (Passed) 2012-09-28 - Chaptered by Secretary of State. Chapter 734, Statutes of 2012. [SB1234 Detail]

Download: California-2011-SB1234-Introduced.html

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BILL NUMBER: SB 1234	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators De León and Steinberg
   (Principal coauthor: Assembly Member Furutani)

                        FEBRUARY 23, 2012

   An act to add Section 20139 to, and to add Title 21 (commencing
with Section 100000) to, the Government Code, relating to pensions,
and making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1234, as introduced, De León. Pensions.
   Existing federal law provides for tax-qualified retirement plans
and individual retirement accounts or individual retirement annuities
by which private citizens may save money for retirement.
   This bill would establish the Golden State Retirement Savings
Trust Act, which would create the Golden State Retirement Savings
Trust that would be administered by the Golden State Retirement
Savings Investment Board, which would also be established by the
bill. The bill would require eligible employers, as defined, and
would authorize other employers to enroll eligible employees, as
defined, into an employer-sponsored retirement plan or pension plan,
as specified, offered by the trust, or a personal pension in the case
of a nonparticipating employer, as specified. The bill would require
a specified percentage of the annual salary of an eligible employee
participating in the retirement or pension plan to be deposited in
the Golden State Retirement Savings Trust, which would be segregated
into a program fund and an administrative fund, both of which would
be continuously appropriated to the board for purposes of the act.
The bill would limit expenditures from the administrative fund, as
specified.
   The bill would require the Employment Development Department to
modify the California Employee's Withholding Allowance Certificate to
create an option for employees to elect to opt out of an
employer-sponsored retirement or pension plan. The bill would require
the Employment Development Department to assess a penalty on any
eligible employer that fails to offer its eligible employees a
retirement or pension plan option, as specified. The bill also makes
a statement of legislative findings.
   The bill would provide that the operational provisions of the
Golden State Retirement Savings Trust Act shall be operative only if
sufficient funds are made available through a nonprofit or private
entity or federal funding, as specified, to allow the board to study,
develop, and obtain the approvals necessary to implement the program
and the board determines that the program can be self-sustaining.
   Existing law establishes the Board of Administration of the Public
Employees' Retirement System and vests the board with various powers
and duties.
   This bill would authorize the board to administer funds in the
Golden State Retirement Savings Trust, as specified.
   Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares the following:
   (a) California workers without access to an employer-sponsored
retirement plan need a seamless, lifelong savings system, providing
them with the opportunity to build their assets and helping them to
attain their future financial stability through a secure, portable
pension.
   (b) Providing California workers with a guaranteed retirement
income to supplement social security, traditionally funded by stable
employer contributions via a defined benefit, employer-based pension
plan, is optimal to ensure that workers accumulate the benefits they
need for a secure retirement. California must pursue guaranteed
replacement income programs, including defined benefit plans, for all
working Californians. Establishing and offering a defined benefit
plan would be an important step toward ensuring the retirement
security for all working Californians.
   (c) Though employer-sponsored guaranteed retirement income
programs are valuable savings tools for workers, given the changing
needs and work habits of California's workers, they alone are
insufficient to afford workers a secure retirement. California
workers need additional retirement savings options to ensure their
retirement security.
   (d) Private individuals have limited access to attractive
financial products that allow them to convert their savings into
secure, lifelong retirement income.
   (e) In creating an additional retirement savings program for its
workers, California would supplement existing savings options, thus
assisting California's working men and women to save for retirement.
This program would be funded by the program's participants.
   (f) The Golden State Retirement Savings Trust established by this
act will promote expanded retirement security for working
Californians.
   (g) The implementation and effectuation of the Golden State
Retirement Savings Trust constitutes the carrying out of a valid and
vital public purpose.
  SEC. 2.  Section 20139 is added to the Government Code, to read:
   20139.  The board shall have the power to administer funds in the
Golden State Retirement Savings Trust pursuant to a contract with the
Golden State Retirement Savings Investment Board as provided in
Title 21 (commencing with Section 100000) and to help all California
workers to plan and save for retirement.
  SEC. 3.  Title 21 (commencing with Section 100000) is added to the
Government Code, to read:

      TITLE 21.  THE GOLDEN STATE RETIREMENT SAVINGS TRUST ACT


   100000.  For purposes of this title the following definitions
shall apply:
   (a) "Board" means the Golden State Retirement Savings Investment
Board.
   (b) "Eligible employee" means a person who is employed by an
eligible employer.
   (c) "Eligible employer" means a person or entity engaged in a
business, industry, profession, trade, or other enterprise in the
state, whether for profit or not for profit, excluding the state, any
county, any municipal corporation, or any of its units or
instrumentalities, that has five or more employees and that satisfies
the requirements to establish or participate in a payroll deposit
pension arrangement.
   (d) "Participating employer" means an eligible employer that
maintains or participates in a personal pension arrangement provided
for by this title for eligible employees.
   (e) "Payroll deposit pension arrangement" means an arrangement by
which an employer makes its payroll system available to employees as
a conduit for transferring salary reduction contributions to a
defined benefit retirement plan.
   (f) "Personal Pension" means a defined benefit retirement plan
offered by the Golden State Retirement Savings Trust.
   (g) "Trust" means the Golden State Retirement Savings Trust
established by this title.
   100002.  (a) There is hereby created the Golden State Retirement
Savings Investment Board, which shall consist of the Treasurer, the
Director of Finance, the Controller, an individual with retirement
savings and investment expertise appointed by the Senate Committee on
Rules, a small business representative and a public member each
appointed by the Governor, and an employee representative appointed
by the Speaker of the Assembly. The Treasurer shall serve as chair of
the board.
   (b) The board shall annually prepare and adopt a written statement
of investment policy. The board shall consider the statement of
investment policy and any changes in the investment policy at a
public hearing.
   (c) The board shall approve an investment management entity or
entities. Not later than 30 days after the close of each month, the
board shall place on file for public inspection during business hours
a report with respect to investments made pursuant to this section
and a report of deposits in financial institutions. The investment
manager shall report the following information to the board within 20
days following the end of the each month:
   (1) The type of investment, name of the issuer, date of maturity,
and the par and dollar amount invested in each security, investment,
and money within the program fund.
   (2) The weighted average maturity of the investments within the
program fund.
   (3) Any amounts in the program fund that are under the management
of private money managers.
   (4) Any amounts in the program fund that are under the management
of the Board of Administration of the Public Employees' Retirement
System.
   (5) The market value as of the date of the report and the source
of this valuation for each security within the program fund.
   (6) A description of compliance with the statement of investment
policy.
   100004.  (a) There is hereby established a retirement savings
trust known as the Golden State Retirement Savings Trust to be
administered by the board for the purpose of promoting greater
retirement savings for California private employees in a convenient,
voluntary, low-cost, and portable manner. The Golden State Retirement
Savings Trust, as a self-sustaining trust, shall pay all costs of
administration out of earnings on moneys on deposit therein.
   (b) The board shall segregate moneys received by the Golden State
Retirement Savings Trust into two funds, which shall be identified as
the program fund and the administrative fund. Notwithstanding
Section 13340, moneys in the trust are hereby continuously
appropriated, without regard to fiscal years, to the board for the
purposes of this title.
   (c) Moneys in the program fund may be invested or reinvested by
the Treasurer or may be invested in whole or in part under contract
with the Board of Administration of the Public Employees' Retirement
System, or private money managers, or both, as determined by the
board.
   (d) Transfers may be made from the program fund to the
administrative fund for the purpose of paying operating costs
associated with administering the trust and as required by this
title. On an annual basis, expenditures from the administrative fund
shall not exceed more than 1 percent of the total program fund. All
costs of administration of the trust shall be paid out of the
administration fund.
   100005.  (a) The personal pension shall include, as determined by
the board, one or more payroll deposit cash balance pension plan
arrangements.
   (b) Pursuant to the authority granted under this title, the board
may establish the following:
   (1) Prototype or master and prototype plans.
   (2) Multiple employer plans.
   (3) Group administrative service arrangements that allow eligible
employers to achieve economies of scale with respect to their
retirement savings arrangements relating to investment, accounting,
payroll processing, employee communications, and investor education.
   (4) Custodial or trustee arrangements for payroll deposit programs
or for other plans.
   100006.  (a) The board, in the capacity of trustee, shall have the
power and authority to do all of the following:
   (1) Make and enter into contracts necessary for the administration
of the trust.
   (2) Adopt a seal and change and amend it from time to time.
   (3) Cause moneys in the program fund to be held and invested and
reinvested.
   (4) Accept any grants, gifts, legislative appropriation, and other
moneys from the state, any unit of federal, state, or local
government or any other person, firm, partnership, or corporation for
deposit to the administrative fund or the program fund.
   (5) Appoint a program administrator and determine the duties of
the program administrator and other staff as necessary and set their
compensation.
   (6) Make provisions for the payment of costs of administration and
operation of the trust.
   (7) Employ staff.
   (8) Retain and contract with the Board of Administration of the
Public Employees' Retirement System, private financial institutions,
other financial and service providers, consultants, actuaries,
counsel, auditors, third-party administrators, and other
professionals as necessary.
   (9) Procure insurance against any loss in connection with the
property, assets, or activities of the trust.
   (10) Procure insurance indemnifying each member of the board from
personal loss or liability resulting from a member's action or
inaction as a member of the board.
   (11) Set minimum and maximum investment levels.
   (12) Collaborate and cooperate with the Board of Administration of
the Public Employees' Retirement System, private financial
institutions, service providers, and business, financial, trade,
membership, and other organizations to the extent necessary or
desirable for the effective and efficient design, implementation, and
administration of the program and to maximize outreach to eligible
employers and eligible employees.
   (13) Cause expenses incurred to initiate, implement, maintain, and
administer the program to be paid from contributions to, or
investment returns or assets of, the program or plans or arrangements
established under the program, to the extent permitted under state
and federal law.
   (14) Facilitate compliance by the defined benefit plans or
arrangements established under the program with all applicable
requirements for the plans under the Internal Revenue Code of 1986,
including tax qualification requirements or any other applicable law
and accounting requirements, including providing or arranging for
assistance to plan sponsors and individuals in complying with
applicable law and tax qualification requirements in a cost-effective
manner.
   (15) Carry out the duties and obligations of the Golden State
Retirement Savings Trust pursuant to this title and exercise any and
all other powers as may be reasonably necessary for the effectuation
of the purposes, objectives, and provisions of this title pertaining
to the trust.
   (b) The board shall adopt regulations it deems necessary to
implement this title consistent with the federal Internal Revenue
Code and regulations issued pursuant to that code to ensure that this
program meets all criteria for federal tax-deferral or tax-exempt
benefits, or both.
   100008.  In addition to the powers and authority granted to the
board pursuant to Section 100006, the board shall have the power and
authority to do the following:
   (a) Cause the pension plans or arrangements established under the
program to be designed, established, and operated, in a manner
consistent with all of the following:
   (1) In accordance with best practices for retirement savings
vehicles.
   (2) To maximize participation, saving, and sound investment
practices, and appropriate selection of default investments.
   (3) With simplicity, ease of administration for participating
employers, and portability of benefits.
   (b) Minimize costs by assisting or facilitating the pooling of
small employers and individuals in purchasing retirement plans or
arrangements, and investments, and through economies of scale,
standardization, designation of investment types, and other measures.

   (c) Arrange for collective, common, and pooled investment of
assets of the pension arrangements, including investments in
conjunction with other funds with which those assets are permitted to
be collectively invested, with a view to saving costs through
efficiencies and economies of scale.
   (d) Explore and establish investment options that offer employees
guaranteed returns on contributions and the conversion of pension
account balances to secure retirement income.
   (e) Disseminate educational information concerning saving and
planning for retirement.
   (f) Disseminate information concerning the tax credits available
to small business owners for establishing new retirement plans and
the federal saver's tax credit available to lower and moderate-income
households for saving in plans or arrangements.
   (g) Submit progress and status reports to participating employers
and eligible employees.
   (h) If necessary, determine the eligibility of an employer,
employee, or other individual to participate in the program.
   (i) Evaluate and establish the process by which an eligible
employee of an eligible employer is able to contribute a portion of
his or her paycheck to a personal pension for automatic deposit of
those contributions and require the participating employer to forward
the employee contribution and related information to the program or
its agents. This may include, but is not limited to, financial
services companies and third-party administrators with the capability
to receive and process employee information and contributions for
payroll deduction pension arrangements or other plans or arrangements
authorized by this title.
   (j) Allow participating employers to use the program to contribute
to the account on their employees' behalf or match their employees'
contributions.
   (k) Evaluate and establish the process by which an individual or
an employee of a nonparticipating employer may establish and make
contributions to a personal pension.
   100010.  (a) (1) After the board opens the personal pension
program for enrollment, any eligible employer may automatically
enroll eligible employees into an employer-sponsored retirement plan
or the personal pension, provide each employee with the option to opt
out of that retirement plan or pension, and permit employees who
choose not to opt out to use their payroll system to direct a portion
of their earnings to the retirement plan or personal pension.
   (2) After the board opens the personal pension program for
enrollment, any employer with four or fewer employees that otherwise
meets the definition of an eligible employer, as defined in
subdivision (d) of Section 100000, may elect to automatically enroll
its employees into an employer-sponsored retirement plan or the
personal pension, provide each employee with the option to opt out of
that retirement plan or pension, and permit employees who choose not
to opt out to use their payroll system to direct a portion of their
earnings to the retirement plan or personal pension.
   (b) Beginning three months after the board opens the personal
pension program for enrollment, eligible employers with more than 100
eligible employees shall automatically enroll those employees into
an employer-sponsored retirement plan or the personal pension,
provide each employee with the option to opt out of that retirement
plan or pension, and permit employees who choose not to opt out to
use their payroll system to direct a portion of their earnings to the
retirement plan or personal pension.
   (c) Beginning six months after the board opens the personal
pension program for enrollment, eligible employers with more than 50
eligible employees shall automatically enroll those employees into an
employer-sponsored retirement plan or the personal pension, provide
each employee with the option to opt out of that retirement plan or
pension, and permit employees who choose not to opt out to use their
payroll system to direct a portion of their earnings to the
retirement plan or personal pension.
   (d) Beginning nine months after the board opens the personal
pension program for enrollment, all other eligible employers shall
automatically enroll their eligible employees into an
employer-sponsored retirement plan or the personal pension, provide
those employees with the option to opt out of that retirement plan or
pension, and permit employees who choose not to opt out to use their
payroll system to direct a portion of their earnings to the
retirement plan or personal pension.
   (e) Employers shall retain the option at all times to set up any
sort of retirement plan, such as a defined benefit plan or a 401(k)
plan, instead of the personal pension.
   (f) An eligible employee shall be enrolled in either an
employer-sponsored retirement savings plan or the personal pension
pursuant to this section unless that employee elects to not
participate in that retirement plan or pension. The employee may
elect to opt out of his or her retirement savings option by making a
notation on the California Employee's Withholding Allowance
Certificate form produced by the Employment Development Department.
If the employee opts out, the employee shall, after 24 months, be
automatically enrolled in either an employer-sponsored retirement
savings plan or the personal pension pursuant to this section unless
that employee again elects to not participate in that retirement plan
or pension.
   (g) An eligible employee may also terminate his or her
participation in the personal pension at any time in a manner
prescribed by the board and thereafter by making a notation on the
California Employee's Withholding Allowance Certificate form produced
by the Employment Development Department.
   (h) Unless otherwise specified by the employee, 3 percent of the
employee's annual salary shall be the default amount contributed to
the personal pension.
   (i) By regulation, the board may adjust the default amount set in
subdivision (h) to no less than 2 percent and no more than 4 percent
and may vary that default amount within that 2 percent to 4 percent
range for participating employees according to the length of time the
employee has contributed to the personal pension.
   100012.  (a) The Employment Development Department shall assess an
eligible employer that fails to offer all of its eligible employees
an employer-sponsored retirement plan or the personal pension
pursuant to Section 10010 a penalty of one thousand dollars ($1,000)
for every eligible employee not offered the retirement option.
   (b) That penalty shall not be assessed if, within 90 days of being
notified of violation of this section, the eligible employer
remedies the failure by offering all of its eligible employees either
an employer-sponsored retirement plan or the personal pension.
   (c) All penalties collected by the Employment Development
Department under this section shall be deposited in the State
Treasury and credited to the General Fund.
   100014.  (a) The Employment Development Department shall modify
the California Employee's Withholding Allowance Certificate (Form DE
4) to create an option for an employee to note his or her decision to
opt out of utilizing either the employer-sponsored retirement
savings plan or the personal pension.
   (b) In modifying the California Employee's Withholding Allowance
Certificate to add the employee retirement savings opt-out provision
pursuant to subdivision (a), the Employment Development Department
shall make the opt-out notation simple and concise and in a manner it
deems necessary to appropriately evidence the employee's
understanding that he or she is choosing not to automatically deduct
earnings to save for retirement.
   100016.  Participating employers shall not be liable for the
investment decisions of employees whose assets are deposited in the
personal pension.
   100018.  (a) Notwithstanding Section 10231.5, the board shall
submit an annual audited financial report, prepared in accordance
with generally accepted accounting principles, on the operations of
the Golden State Retirement Savings Trust by August 1 to the
Governor, the Controller, the State Auditor, and the Legislature. The
annual audit shall be made by an independent certified public
accountant and shall include, but not be limited to, direct and
indirect costs attributable to the use of outside consultants,
independent contractors, and any other persons who are not state
employees.
   (b) The annual audit shall be supplemented by the following
information prepared by the board:
   (1) Any studies or evaluations prepared in the preceding year.
   (2) A summary of the benefits provided by the trust including the
number of participants in the trust.
   (3) Any other information that is relevant in order to make a
full, fair, and effective disclosure of the operations of the Golden
State Retirement Savings Trust.
   100022.  The board shall initially conduct a market analysis to
determine whether the necessary conditions for implementation of this
title can be met, including, but not limited to, likely
participation rates, participants' comfort with various investment
vehicles and degree of risk, contribution levels, and the rate of
account closures and rollovers. The board shall conduct this analysis
only if sufficient funds are made available through a nonprofit or
private entity, federal funding, or an annual Budget Act
appropriation. The board shall forward its findings to the Chair of
the Senate Public Employment and Retirement Committee and to the
Chair of the Assembly Public Employees, Retirement and Social
Security Committee, pursuant to Section 9795.
   100024.  With the exceptions of subdivision (a) of Section 100002,
and Sections 100022 and 100026, the provisions of this title shall
become operative only if funds are made available through a nonprofit
or private entity or federal funding, in amounts sufficient to allow
the board to study, develop, and obtain the approvals necessary to
implement this title and the board notifies the Director of Finance
that, based on its market analysis, the provisions of this title can
be self-sustaining pursuant to this title.
   100026.  This title shall be construed liberally in order to
effectuate its legislative intent. The purposes of this title and all
of its provisions with respect to the powers granted shall be
broadly interpreted to effectuate that intent and purposes and not as
to any limitation of powers.