Bill Text: CA SB1234 | 2011-2012 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
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-Amended.html
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-Amended.html
BILL NUMBER: SB 1234 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 27, 2012
AMENDED IN ASSEMBLY JUNE 13, 2012
AMENDED IN SENATE MAY 29, 2012
AMENDED IN SENATE MAY 2, 2012
AMENDED IN SENATE APRIL 17, 2012
AMENDED IN SENATE MARCH 27, 2012
INTRODUCED BY Senators De León and Steinberg
(Principal coauthor: Assembly Member Furutani)
(Coauthors: Senators Hernandez, Pavley, and Price)
(Coauthors: Assembly Members Allen, Ammiano, Blumenfield, and
Solorio)
FEBRUARY 23, 2012
An act to add Section 20139 to, and to add Title 21 (commencing
with Section 100000) to, the Government Code, and to add Section
1088.9 to the Unemployment Insurance Code, relating to retirement
savings plans, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 1234, as amended, De León. Retirement savings plans.
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 enact the California Secure Choice Retirement
Savings Trust Act, which would create the California Secure Choice
Retirement Savings Trust to be administered by the California Secure
Choice Retirement Savings Investment Board, which would also be
established by the bill. The bill would require eligible employers,
as defined, to offer a payroll deposit retirement savings arrangement
so that eligible employees, as defined, could contribute a portion
of their salary or wages to a retirement savings program account in
the California Secure Choice Retirement Savings Program, as
specified. The bill would require eligible employees to participate
in the program, unless the employee opts out of the program, as
specified. The bill would specify risk management and investment
policies that the board would be subject to regarding administration
of the program. The bill would require a specified percentage of the
annual salary or wages of an eligible employee participating in the
program to be deposited in the California Secure Choice 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 also require the board to establish a Gain and Loss Reserve
Account within the program fund.
The bill would, contingent upon sufficient interest and funding by
vendors, as specified, require the board to establish a Retirement
Investments Clearinghouse on its Internet Web site and a vendor
registration process through which information about
employer-sponsored retirement plans, and payroll deduction individual
retirement accounts and annuities offered by private sector
providers is made available for consideration by eligible employers.
The bill would require an employer to use the Employment
Development Department exemption certificate to create an option for
employees to elect to opt out of the program. The bill would,
commencing 6 months after the program is ready to proceed, require
the Employment Development Department to assess a penalty on any
eligible employer that fails to make the program available to
eligible employees, as specified. The bill also would make a
statement of legislative findings. The bill would provide that the
state would have no liability for the payment of the benefits under
the program, as specified.
The bill would provide that the operational provisions of the
California Secure Choice Retirement Savings Trust Act shall be
operative only if sufficient funds are made available through a
nonprofit or private entity, federal funding, or the annual Budget
Act, 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 that board to administer funds in the
California Secure Choice 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 program that offers
secure and portable retirement savings.
(b) According to recent data by the University of California,
Berkeley, Center for Labor Research and Education, middle class
families in California are at significant risk of not having enough
retirement income to meet even basic expenses, as nearly 50 percent
of middle-income California workers will retire at or near poverty.
(c) The lack of sufficient retirement savings poses a significant
threat to the state's already strained safety net programs and also
threatens to undermine California's fiscal stability and ongoing
economic recovery.
(d) The looming retirement security crisis exacerbates the state's
high unemployment rate, as seniors are forced to work longer and
fewer jobs are available for younger workers trying to enter the
workforce.
(e) 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 universal
retirement savings program to provide a vital supplement to social
security income would be an important step toward ensuring the
retirement security of all working Californians.
(f) 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.
(g) Private individuals have limited access to attractive
financial products that allow them to convert their savings into
secure, lifelong retirement income.
(h) Employers in the private sector that want to offer a
retirement savings plan for their employees often face significant
barriers in setting up their own workplace plans. In addition to the
costs of hiring service providers and paying fees, employer-sponsored
plans can be complex to maintain and administer, and they are
subject to an array of rules and regulations, including fiduciary
responsibility.
(i) 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 without
incurring liabilities to the state.
(j) The California Secure Choice Retirement Savings Trust
established by this act will promote expanded retirement security for
working Californians.
(k) The implementation and effectuation of the California Secure
Choice 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
California Secure Choice Retirement Savings Trust pursuant to a
contract with the California Secure Choice 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 CALIFORNIA SECURE CHOICE RETIREMENT SAVINGS
TRUST ACT
100000. For purposes of this title the following definitions
shall apply:
(a) "Board" means the California Secure Choice Retirement Savings
Investment Board.
(b) "California Secure Choice Retirement Savings Program" or
"program" means a retirement savings program offered by the
California Secure Choice Retirement Savings Trust.
(c) (1) "Eligible employee" means a person who is employed by an
eligible employer.
(2) "Eligible employee" does not include:
(A) Any employee covered under the federal Railway Labor Act (45
U.S.C. Sec. 151), or any employee engaged in interstate commerce so
as not to be subject to the legislative powers of the state, except
insofar as application of this title is authorized under the United
States Constitution or laws of the United States.
(B) Any employee covered by a valid collective bargaining
agreement that expressly provides for a multiemployer Taft-Hartley
pension plan.
(d) "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 federal
government, the state, any county, any municipal corporation, or any
of the state's units or instrumentalities, that has five or more
employees and that satisfies the requirements to establish or
participate in a payroll deposit retirement savings arrangement.
(e) "IRA" means an individual retirement account or individual
retirement annuity under Section 408(a) or 408(b) of Title 26 of the
United States Code.
(e)
(f) "Participating employer" means an eligible employer
that provides a payroll deposit retirement savings arrangement
provided for by this title for eligible employees.
(f)
(g) "Payroll deposit retirement savings arrangement"
means an arrangement by which an employer allows employees to remit
payroll deduction contributions to a retirement savings program.
(g) "IRA" means an individual retirement account or individual
retirement annuity under Section 408(a) or 408(b) of Title 26 of the
United States Code.
(h) "Stated interest rate" means the rate of interest creditable
to program accounts as determined by the board pursuant to
subdivision (c) of Section 100005 100008
.
(i) "Trust" means the California Secure Choice Retirement Savings
Trust established by this title.
100002. (a) (1) There is hereby created within state government
the California Secure Choice Retirement Savings Investment Board,
which shall consist of seven members, with the Treasurer serving as
chair, as follows:
(A) The Treasurer.
(B) The Director of Finance, or his or her designee.
(C) The Controller.
(D) An individual with retirement savings and investment expertise
appointed by the Senate Committee on Rules.
(E) A small business representative appointed by the Governor.
(F) A public member appointed by the Governor.
(G) An employee representative appointed by the Speaker of the
Assembly.
(2) Members of the board appointed by the Governor, the Senate
Committee on Rules, and the Speaker of the Assembly shall serve at
the pleasure of the appointing authority.
(b) All members of the board shall serve without compensation.
Members of the board shall be reimbursed for necessary travel
expenses incurred in connection with their board duties.
(c) A board member, program administrator, and other staff of the
board shall not do any of the following:
(1) Directly or indirectly have any interest in the making of any
investment made for the program, or in the gains or profits accruing
from any investment made for the program.
(2) Borrow any funds or deposits of the trust, or use those funds
or deposits in any manner, for himself or herself or as an agent or
partner of others.
(3) Become an endorser, surety, or obligor on investments by the
board.
(d) The board and the program administrator and staff shall
discharge their duties with respect to the trust solely in the
interest of the program participants as follows:
(1) For the exclusive purposes of providing benefits to program
participants and defraying reasonable expenses of administering the
program.
(2) By investing with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with those matters would use in the
conduct of an enterprise of a like character and with like aims.
(e) (1) The board shall annually prepare and adopt a written
statement of investment policy that includes a risk management and
oversight program. The board shall consider the statement of
investment policy and any changes in the investment policy at a
public hearing.
(2) The investment policy shall adhere to the following guiding
principles:
(A) The primary objective of the investment policy is to preserve
the safety of principal and provide a stable and low-risk rate of
return.
(B) The investment policy shall mitigate risk by maintaining a
balanced investment portfolio that provides assurance that no single
investment or class of investments will have a disproportionate
impact on the total portfolio.
(3) The following list represents the entire range of asset
categories that the board may consider and the only types of
investments which shall be permitted for the investment of funds:
(A) Domestic equities and international equities.
(B) Medium and long-term debt obligations of domestic
corporations.
(C) United States government and government sponsored entity debt
obligations.
(D) Real estate commingled funds that invest in publicly traded
real estate securities.
(E) Money market instruments, cash, and money market mutual funds
that are registered in the United States and denominated in United
States dollars.
(F) Investments in mutual funds, but limited to existing, rated
mutual funds, that are registered in the United States and
denominated in United States dollars.
(G) Insurance agreements.
(H) FDIC-insured bank products.
(4) Equities shall not exceed 50 percent of the overall asset
allocation of the fund.
(5) The investment policy shall also adhere to the following
restrictions:
(A) Borrowing for investment purposes, or leverage, is prohibited.
(B) Instruments known as variable rate demand notes, floaters,
inverse floaters, leveraged floaters, and equity-linked securities
are not permitted. Investment in any instrument, which is commonly
considered a "derivative" instrument, including, but not limited to,
options, futures, swaps, caps, floors, and collars, is prohibited.
(C) Contracting to sell securities not yet acquired in order to
purchase other securities for purposes of speculating on developments
or trends in the market is prohibited.
(6) The risk management and oversight program shall be designed to
ensure that an effective risk management system is in place to
monitor the risk levels of the California Secure Choice Retirement
Savings Program investment portfolio and ensure that the risks taken
are prudent and properly managed. The program shall be managed to
provide an integrated process for overall risk management on both a
consolidated and disaggregated basis, and to monitor investment
returns as well as risk to determine if the risks taken are
adequately compensated compared to applicable performance benchmarks
and standards.
(f) 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 California Secure Choice 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 California Secure
Choice 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 California
Secure Choice 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
administrative fund.
(e) Any contributions paid by employees and employers into the
trust shall be used exclusively for the purpose of paying benefits to
the participants of the California Secure Choice Retirement Savings
Program, for the cost of administration of the program, and for
investments made for the benefit of the program.
100004.5. 100006. (a) The board
shall establish a segregated account within the program fund to be
known as the Gain and Loss Reserve Account, and the board shall have
sole authority over the account. The Gain and Loss Reserve Account
shall be maintained for the program and may be used to credit
interest at the stated interest rate for program years in which the
board determines that the stated interest rate cannot be met from
investment earnings.
(b) The board shall establish a goal for the balance of the Gain
and Loss Reserve Account and shall periodically review the
sufficiency of the reserve account based on the recommendations of
the board's actuary.
(c) The board may allocate excess earnings of the program with
respect to assets attributable to the program to the Gain and Loss
Reserve Account. In addition, the board may allocate any liability
gains and losses to the Gain and Loss Reserve Account. Based on an
actuarial valuation following each program year, the board shall
determine annually the amount, if any, that is to be allocated to the
Gain and Loss Reserve Account for that program year. In determining
whether to allocate excess earnings to the Gain and Loss Reserve
Account, the board shall consider all of the following:
(1) Whether or not the program has excess earnings.
(2) The sufficiency of the Gain and Loss Reserve Account in light
of the goal established pursuant to subdivision (b).
(3) The amount required for the program's administrative costs.
(4) The amount required for crediting individuals' accounts at the
stated interest rate.
(d) In determining whether to allocate liability gains and losses
to the Gain and Loss Reserve Account, the board shall consider the
matters described in paragraphs (2), (3), and (4) of subdivision (c).
100005. 100008. (a) The California
Secure Choice Retirement Savings Program shall include, as determined
by the board, one or more payroll deposit retirement
savings IRA arrangements.
(b) Individual accounts under the California Secure Choice
Retirement Savings Program shall be nominal accounts.
Individual contributions and any employer contributions
Contributions on behalf of the individual that are
specifically identified as creditable to the program shall be treated
as credits to the individual's California Secure Choice Retirement
Savings Program account, together with interest credited at the
stated interest rate and any additional earnings credited thereon.
The balance of the credits in an individual's account shall determine
the amount to which the individual is entitled under the program
upon termination of coverage by the program. The individual shall not
have the right or claim to any specific assets of the account,
program, or program fund.
(c) (1) Prior to July 1 of the initial program year, and prior to
the beginning of each program year thereafter, the board shall adopt
a program amendment with respect to the program to declare the stated
rate at which interest shall be credited to program accounts for the
following program year.
(2) Interest shall be credited to program accounts and shall be
computed at the stated interest rate on the balance of credits in an
individual's account and shall be compounded daily.
(d) An individual's retirement savings benefit under the program
shall be an amount equal to the balance of the credits in the
individual's program account on the date the retirement savings
benefit becomes payable.
100006. 100010. (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, and secure private
underwriting and reinsurance to manage risk and insure the retirement
savings benefit.
(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 in accordance
with contribution limits set for IRAs by the Internal Revenue Code
.
(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 arrangements
established under the program, to the extent permitted under state
and federal law.
(14) Facilitate compliance by the retirement savings program or
arrangements established under the program with all applicable
requirements for the program 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 program 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 California Secure
Choice 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 the
program meets all criteria for federal tax-deferral or tax-exempt
benefits, or both.
100008. 100012. In addition to the
powers and authority granted to the board pursuant to Section
100006 100010 , the board shall have
the power and authority to do the following:
(a) Cause the retirement savings program 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) Arrange for collective, common, and pooled investment of
assets of the retirement savings program or 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.
(c) Explore and establish investment options that offer employees
guaranteed returns on contributions and the conversion of
individual retirement savings account balances to secure
retirement income without incurring debt or liabilities to the state.
(d) Disseminate educational information concerning saving and
planning for retirement.
(e) Disseminate information concerning the tax credits available
to small business owners for establishing new retirement plans and
the federal Retirement Savings Contribution Credit (Saver's Credit)
available to lower and moderate-income households for qualified
savings contributions.
(f) Submit progress and status reports to participating employers
and eligible employees.
(g) If necessary, determine the eligibility of an employer,
employee, or other individual to participate in the program.
(h) Evaluate and establish the process by which an eligible
employee of an eligible employer is able to contribute a portion of
his or her salary or wages to the program for automatic deposit of
those contributions and the participating employer provides a payroll
deposit retirement savings arrangement 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 deposit
retirement savings arrangements or other arrangements authorized by
this title.
(i) Design and establish the process for the enrollment of program
participants.
(j) Allow participating employers to use the program to contribute
to the account their employees' individual
retirement accounts on their employees' behalf or match their
employees' contributions , provided that the contributions would
be permitted under the Internal Revenue Code and would not cause the
program to be treated as an employee benefit plan under the Employee
Retirement Income Security Act .
(k) Evaluate and establish the process by which an individual or
an employee of a nonparticipating employer may enroll and make
contributions to the program.
100009. 100014. (a) Prior to
opening the California Secure Choice Retirement Savings Program for
enrollment, the board shall design and disseminate to employers
through the Employment Development Department (EDD) an employee
information packet. The packet shall include background information
on the program and appropriate disclosures for employees.
(b) The disclosure form shall include, but not be limited to, all
of the following:
(1) The benefits and risks associated with making contributions to
the program.
(2) The mechanics of how to make contributions to the program.
(3) How to opt out of the program.
(4) The process for withdrawal of retirement savings.
(5) How to obtain additional information on the program.
(c) In addition, the disclosure form shall clearly articulate the
following:
(1) Employees seeking financial advice should contact financial
advisors, that employers are not in a position to provide financial
advice, and that employers are not liable for decisions employees
make pursuant to Section 100016 100034
.
(2) The program is not an employer-sponsored retirement plan.
(2)
(3) The program fund is privately insured and is not
guaranteed by the State of California.
(d) The disclosure form shall include a signature line for the
employee to sign and date acknowledging that the employee has read
all of the disclosures and understands their content.
(e) The employee information packet shall be made available to
employers through EDD and supplied to employees at the time of
hiring. All new employees shall review the packet and acknowledge
having read it by signing the signature line accompanied by the date
of the signature.
(f) The employee information packet shall be supplied to existing
employees when the program is initially launched for that
participating employer pursuant to Section 100010
100032 and employees shall review and sign the disclosure
form at that time.
100016. (a) Prior to opening the California Secure Choice
Retirement Savings Program for enrollment, if there is sufficient
interest by vendors to participate and provide the necessary funding,
the board shall establish both of the following:
(1) A Retirement Investments Clearinghouse on its Internet Web site.
(2) A vendor registration process through which information about
employer-sponsored retirement plans, and payroll deduction individual
retirement accounts and annuities offered by private sector
providers is made available for consideration by eligible employers.
(b) Vendors who would like to participate in the board's
Retirement Investments Clearinghouse and be listed on the board's
Internet Web site as a registered vendor shall provide all of the
following information:
(1) A statement of experience in California and in other states in
providing employer-sponsored retirement plans, and payroll deduction
individual retirement accounts and annuities.
(2) A description by the vendor of the types of retirement
investment products offered.
(3) A disclosure of all expenses paid directly or indirectly by
retirement plan participants, including, but not limited to,
penalties for early withdrawals, declining or fixed withdrawal
charges, surrender or deposit charges, management fees, and annual
fees, supported by documentation as required for prospectus
disclosure by the National Association of Securities Dealers and the
Securities and Exchange Commission. Vendors shall be required to
provide information regarding the impact of product fees upon a
hypothetical investment, as described in Section 100022.
(4) The types of products, product features, services offered to
participants, and information about how to access product
prospectuses or other relevant product information.
(5) A discussion of the ability, experience, and commitment of the
vendor to provide retirement counseling and education services,
including, but not limited to, access to group meetings and
individual counseling by various means, including telephone and
telecommunications devices for the deaf (TDD), Internet, and
face-to-face consultations by registered representatives.
(6) A statement of the financial strength of the vendor by
identifying its ratings assigned by nationally recognized rating
services that evaluate the financial strength of similar companies.
(7) The location of offices and counselors, individual registered
representatives, brokers, financial planners, agents, or other
methods of distribution, of the vendor that would serve employers and
their employees in California.
(8) A description of the ability of the vendor to comply with all
applicable provisions of federal and state law governing retirement
plans, including minimum distribution requirements and contribution
limits.
(9) To the extent applicable, the demonstrated ability of the
vendor to offer an appropriate array of accumulation funding options,
including, but not limited to, investment options that offer
guaranteed returns on contributions and the conversion of retirement
savings account balances to secure retirement income, a diversified
mix of value, growth, growth and income, hybrid, and index funds or
accounts across large, medium, and small capitalization asset
classes, both domestic and international.
(10) A discussion of the range of administrative and customer
services provided, including asset allocation, accounting and
administration of benefits for individual participants, recordkeeping
for individual participants, asset purchase, control, and
safekeeping, execution of a participant's instructions as to asset
and contribution allocation, calculation of daily net asset values,
direct access for participants to their account information, periodic
reporting that is not less than quarterly to active participants on
their account balances and transactions, and compliance with the
standard of care consistent with federal law and applicable to the
provision of investment services.
(11) Certification by the vendor that the information provided to
the board accurately reflects the provisions of the retirement
investment products they register.
(c) Vendors shall supply information and data in the format
prescribed by the board.
100018. Registration shall be offered to vendors once annually,
and renewal of registration shall be required at least once every
five years thereafter for vendors who wish to continue to participate
in the Retirement Investments Clearinghouse. The board shall provide
public notice prior to the initial registration, annual
registration, and registration renewal periods.
100020. (a) The board may remove a vendor from the registry if
the vendor submits materially inaccurate information to the board,
does not remit assessed fees within 60 days, or fails to submit
notice of material changes to its registered investment products.
Vendors found to have submitted materially inaccurate information to
the board shall be allowed 60 days to correct the information.
(b) The board shall remove a vendor from the registry if the
vendor is not licensed or has had its license revoked by the National
Association of Securities Dealers or the California Department of
Insurance for engaging in conduct prohibited by those entities.
(c) The board shall establish an appeals process for vendors who
are denied registration or removed from the registry.
100022. (a) The board shall maintain the Retirement Investments
Clearinghouse containing the information required in Section 100016
about the retirement investment products offered by each registered
vendor and objective comparisons of vendors and types of products.
(b) The clearinghouse shall include information on investment
performance based upon the investment's average annual total return
as measured by a nationally recognized rating service selected by the
board for standard periods of time of not less than one year.
(c) The board's Internet Web site shall include a table showing,
for each registered fund, the total fee cost in dollars incurred by a
shareholder who initially invested five thousand dollars ($5,000),
earned a 5 percent rate of return for one-, five-, 10-, 15-, and
20-year time periods. This table shall be accompanied by a disclaimer
that the rate of return is for purposes of illustrating the
respective impacts of different fee amounts on each investment, and
is not to predict future investment returns.
100024. The board shall include a notice of the existence of, and
the Internet Web site address for, the Retirement Investments
Clearinghouse in a notice disseminated to eligible employers through
the Employment Development Department.
100026. A vendor may not charge a fee associated with a
registered product that is not disclosed.
100028. (a) The actual cost of establishing the vendor
registration system and the Retirement Investments Clearinghouse
shall be borne equally by registered vendors, based on the total
number of registered vendors. Each registered vendor shall pay a
one-time establishment fee equal to a pro rata share of the
establishment costs charged to vendors that register with the board
prior to the close of the initial registration period, as determined
by the board. The one-time establishment fee charged to vendors that
register with the board after the completion of the initial
registration period shall be distributed equally among registered
vendors that have paid the establishment fee and credited toward
subsequent maintenance and administrative fees charged to each
vendor.
(b) The actual cost of maintaining the vendor registration system
and the Retirement Investments Clearinghouse, and the costs
associated with publicizing the availability of the clearinghouse to
eligible employers, shall be borne equally by registered vendors,
based on the total number of registered vendors. Each registered
vendor shall pay a renewal fee equal to a pro rata share of the
maintenance costs, as determined by the board.
(c) Each registered vendor shall pay an administrative fee for
each retirement investment product it offers to employers, which
shall represent the actual costs associated with processing the
information related to the investment option and presenting it on the
Retirement Investments Clearinghouse, as determined by the board.
(d) The board shall not divert California Secure Choice Retirement
Savings Trust funds to establish or maintain the vendor registration
system or the Retirement Investments Clearinghouse.
100030. (a) The board and the program, and its officers and
employees, are not responsible for, and shall not be held liable for,
the adequacy of the information provided by the participating
vendors contained in the clearinghouse. The clearinghouse maintained
by the board serves only to provide information supplied by the
participating vendors for the consideration of the selection of
retirement investment products.
(b) Participating vendors shall not utilize the program's logo, or
claim or infer endorsement or recommendation by the board or the
program with respect to products and services identified by the
vendors in the clearinghouse. At the discretion of the board, a
violation of this section may lead to removal from the registry.
(c) The board and the program shall not be held liable for the
actions of registered vendors.
100010. 100032. (a) After the board
opens the California Secure Choice Retirement Savings Program for
enrollment, any employer may choose to have a payroll deposit
retirement savings arrangement to allow employee participation in the
program.
(b) Beginning three months after the board opens the program for
enrollment, eligible employers with more than 100 eligible employees
and that do not offer an employer-sponsored retirement plan or
automatic enrollment payroll deduction IRA shall have a payroll
deposit retirement savings arrangement to allow employee
participation in the program.
(c) Beginning six months after the board opens the program for
enrollment, eligible employers with more than 50 eligible employees
and that do not offer an employer-sponsored retirement plan or
automatic enrollment payroll deduction IRA shall have a payroll
deposit retirement savings arrangement to allow employee
participation in the program.
(d) Beginning nine months after the board opens the program for
enrollment, all other eligible employers that do not offer an
employer-sponsored retirement plan or automatic enrollment payroll
deduction IRA shall have a payroll deposit retirement savings
arrangement to allow employee participation in the program.
(e) (1) Each eligible employee shall be enrolled in the program
unless the employee elects not to participate in the program. An
eligible employee may elect to opt out of the program by making a
notation on the exemption certificate produced by the Employment
Development Department.
(2) Following initial implementation of the program pursuant to
this section, at least once every two years, participating employers
shall designate an open enrollment period during which eligible
employees that previously opted out of the program shall be enrolled
in the program unless the employee again elects to opt out as
provided in this subdivision.
(3) An employee who elects to opt out of the program who
subsequently wants to participate through the employer's payroll
deposit retirement savings arrangement may only enroll during the
employer's designated open enrollment period or if permitted by the
employer at an earlier time.
(f) Employers shall retain the option at all times to set up any
type of employer-sponsored retirement plan, such as a defined benefit
plan or a 401(k) , Simplified Employee Pension (SEP) plan, or
Savings Incentive Match Plan for Employees (SIMPLE) plan, or
to offer an automatic enrollment payroll deduction IRA,
instead of having a payroll deposit retirement savings arrangement to
allow employee participation in the California Secure Choice
Retirement Savings Program.
(g) An eligible employee may also terminate his or her
participation in the program at any time in a manner prescribed by
the board and thereafter by making a notation on the exemption
certificate produced by the Employment Development Department.
(h) Unless otherwise specified by the employee, a participating
employee shall contribute 3 percent of the employee's annual salary
or wages to the program.
(i) By regulation, the board may adjust the contribution amount
set in subdivision (h) to no less than 2 percent and no more than 4
percent and may vary that amount within that 2 percent to 4 percent
range for participating employees according to the length of time the
employee has contributed to the program.
100016. 100034. (a) Employers shall
not have any liability for an employee's decision to participate in,
or opt out of, the California Secure Choice Retirement Savings
Program, or for the investment decisions of employees whose assets
are deposited in the program.
(b) Employers shall not be a fiduciary, or considered to be a
fiduciary, over the California Secure Choice Retirement Savings Trust
or the program. An employer shall not bear responsibility for the
administration, investment, or investment performance of the program.
An employer shall not be liable with regard to investment returns,
program design, and benefits paid to program participants.
(c) An employer's voluntary contribution to the program
on behalf of an employee under subdivision (j) of
Section 100012 shall not in any way contradict the provisions
of this section or change the employer's relationship to the program
or an employer's obligations to employees.
100017. 100036. The state shall not
have any liability for the payment of the retirement savings benefit
that is guaranteed to program participants pursuant to this title.
Any financial liability for the payment of benefits in excess of
funds available under the program shall be borne by the underwriters
pursuant to the contract entered into with the board on behalf of the
program participants. The state, and any of the funds of the state,
shall have no obligation for payment of the guaranteed benefits
arising from this title.
100018. 100038. (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 California Secure Choice
Retirement Savings Trust by August 1 to the Governor, the Controller,
the State Auditor, and the Legislature, pursuant to Section 9795.
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
California Secure Choice Retirement Savings Trust.
100022. 100040. 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, or
from federal funding. The board shall forward and offer to
present its findings to the Chair of the Senate Committee on
Labor and Industrial Relations, the Chair of the Assembly
Committee on Labor and Employment, the Chair of the Senate
Committee on Public Employment and Retirement, and the Chair of the
Assembly Committee on Public Employees, Retirement and Social
Security.
100024. 100042. With the exceptions
of subdivision (a) of Section 100002, and Sections 100022
100040 and 100026 100044
, the provisions of this title shall become operative only if
funds are made available through a nonprofit or private entity,
federal funding, or an annual Budget Act appropriation 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. 100044. 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.
SEC. 4. Section 1088.9 is added to the Unemployment Insurance
Code, to read:
1088.9. (a) The department shall have the power and duties
necessary to administer the enforcement of employer compliance with
Title 21 (commencing with Section 100000) of the Government Code.
(b) An eligible employer shall use the department's exemption
certificate to create an option for an eligible employee to note his
or her decision to opt out of utilizing the California Secure Choice
Retirement Savings Program. The 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.
(c) Each eligible employer who, without good cause, fails to allow
its eligible employees to participate in the California Secure
Choice Retirement Savings Program pursuant to Sections
100009 100014 and 100010
100032 of the Government Code, on or before 90 days after
service of notice by the director pursuant to Section 1206 of his or
her failure to comply, shall pay a penalty of two hundred fifty
dollars ($250) per eligible employee if noncompliance extends 90 days
or more after the notice, and if found to be in willful
noncompliance 180 days or more after the notice, an
additional penalty of five hundred dollars ($500) per eligible
employee.
(d) The department shall enforce this penalty as part of its
existing investigation and audit function.
(e) The provisions of this article, the provisions of Article 9
(commencing with Section 1176), with respect to refunds and
overpayments, and the provisions of Article 11 (commencing with
Section 1221), with respect to administrative appellate review shall
apply to the penalty imposed by this section. Penalties collected
pursuant to this section shall be deposited in the contingent fund.
(f) This section shall become operative six months after the board
notifies the Director of the Employment Development Department that
the full implementation of Title 21 (commencing with Section 100000)
of the Government Code will proceed. Upon receipt of the notification
from the board, the department shall immediately post on its
Internet Web site a notice stating that this section is operative,
and the date that it is first operative.
(g) If the department participates in the implementation and
administration of the program, it may charge the board a reasonable
fee for costs it incurs for implementing and administering the
program.
