BILL NUMBER: SB 1234 CHAPTERED
BILL TEXT
CHAPTER 734
FILED WITH SECRETARY OF STATE SEPTEMBER 28, 2012
APPROVED BY GOVERNOR SEPTEMBER 28, 2012
PASSED THE SENATE AUGUST 31, 2012
PASSED THE ASSEMBLY AUGUST 31, 2012
AMENDED IN ASSEMBLY AUGUST 20, 2012
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, Lara,
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, 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 authorize 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 the opt-out form disseminated by the
Employment Development Department to be used to create an option for
employees to elect to opt out of the program, as specified. 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, upon sufficient funds being made available through a
nonprofit or private entity or federal funding, would require the
board to conduct a market analysis to determine whether the necessary
conditions for implementation can be met, as specified. The bill
would require moneys made available to conduct the market analysis to
be deposited in the Secure Choice Retirement Savings Program Fund
which would be created in the State Treasury. The bill would provide
that the operational provisions of the California Secure Choice
Retirement Savings Trust Act shall be operative only if the board
determines that, based on the market analysis, the provisions will be
self-sustaining, and 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 implement the program until
the trust has sufficient funds to be self-sustaining.
The bill would require the board to ensure that an insurance,
annuity, or other funding mechanism is in place at all times that
protects the value of individuals' accounts and protects,
indemnifies, and holds the state harmless at all times against any
and all liability in connection with funding retirement benefits
pursuant to these provisions.
The bill would prohibit the board from implementing the program if
the IRA arrangements offered fail to qualify for the favorable
federal income tax treatment ordinarily accorded to IRAs under the
Internal Revenue Code, or if it is determined that the program is an
employee benefit plan under the federal Employee Retirement Income
Security Act of 1974.
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.
Appropriation: yes.
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 reliable retirement income
to supplement social security is optimal to ensure that workers
accumulate the savings they need for a secure retirement. Ideally,
all private sector workers would have access to employer-sponsored
retirement plans, but over 6.3 million California workers, 75 percent
of whom earn less than $50,000 per year, do not have access to
retirement savings opportunities through their jobs. When workers are
offered the opportunity to save through their place of employment,
they are significantly more likely to participate and make steady and
systematic contributions to build their retirement savings.
Establishing and offering a retirement savings program for workers
without access to an employer-sponsored retirement plan or payroll
deduction IRA would provide a vital supplement to social security
income and would be an important step toward improving the retirement
security of all working Californians.
(f) 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.
(g) The California Secure Choice Retirement Savings Trust
established by this act will promote expanded retirement security for
working Californians.
(h) 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.
(f) "Participating employer" means an eligible employer that
provides a payroll deposit retirement savings arrangement provided
for by this title for eligible employees.
(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.
(h) "Stated interest rate" means the rate of interest allocated to
program accounts as determined by the board pursuant to subdivision
(c) of Section 100008.
(i) "Trust" means the California Secure Choice Retirement Savings
Trust established by this title.
(j) "Vendor" means a registered investment company or admitted
life insurance company qualified to do business in California that
provides retirement investment products. "Vendor" also includes a
company that is registered to do business in California that provides
payroll services or recordkeeping services and offers retirement
plans or payroll deposit IRA arrangements using products of regulated
investment companies and insurance companies qualified to do
business in California. "Vendor" does not include individual
registered representatives, brokers, financial planners, or agents.
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-term 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, the costs of which shall be paid out of funds held in the
trust and shall not be attributed to the administrative costs of the
board in operating the trust. 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. After sufficient funds are
made available for this title to be operative pursuant to Section
100042, the California Secure Choice Retirement Savings Trust, as a
self-sustaining trust, shall pay all costs of administration only out
of 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. Operating costs associated with administering
the trust do not include the procurement of private underwriting for
the retirement savings' return.
(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.
100006. (a) The board may establish a segregated account within
the program fund to be known as the Gain and Loss Reserve Account.
The board shall have sole authority over the Gain and Loss Reserve
Account, if established. The Gain and Loss Reserve Account may be
used to allocate 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 making allocations to 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).
100008. (a) The California Secure Choice Retirement Savings
Program shall include, as determined by the board, one or more
payroll deposit IRA arrangements.
(b) (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 in coordination with the investment management
entity or entities with respect to the program to declare the stated
rate at which interest shall be allocated to program accounts for the
following program year.
(2) Interest shall be allocated to program accounts and shall be
computed at the stated interest rate on the balance of an individual'
s account and shall be compounded daily.
(c) An individual's retirement savings benefit under the program
shall be an amount equal to the balance in the individual's program
account on the date the retirement savings benefit becomes payable.
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, the costs of which shall be
paid out of funds held in the trust and shall not be attributed to
the administrative costs of the board in operating the trust, 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 rate of return.
(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 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.
100012. In addition to the powers and authority granted to the
board pursuant to Section 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
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 remit
employees' contributions to their individual retirement accounts on
their employees' behalf.
(k) Allow participating employers to make their own contributions
to their employees' individual retirement accounts, 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 federal Employee Retirement Income Security Act.
(l) Evaluate and establish the process by which an individual or
an employee of a nonparticipating employer may enroll in and make
contributions to the program.
100013. The board shall ensure that an insurance, annuity, or
other funding mechanism is in place at all times that protects the
value of individuals' accounts. The funding mechanism shall protect,
indemnify, and hold the state harmless at all times against any and
all liability in connection with funding retirement benefits pursuant
to this title. The costs of the funding mechanism shall be paid out
of the funds held in the trust and shall not be attributed to the
administrative costs of the board in operating the trust.
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 100034.
(2) The program is not an employer-sponsored retirement plan.
(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 also include an opt-out
form for an eligible employee to note his or her decision to opt out
of participation in the program. The opt-out notation shall be simple
and concise and drafted in a manner that the board deems necessary
to appropriately evidence the employee's understanding that he or she
is choosing not to automatically deduct earnings to save for
retirement.
(f) 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.
(g) The employee information packet shall be supplied to existing
employees when the program is initially launched for that
participating employer pursuant to Section
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 IRAs
offered by private sector providers is made available for
consideration by eligible employers.
(b) Vendors that 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
IRAs.
(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 it registers.
(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 that 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
investments offered by the vendor are products of a regulated
investment company or insurance company that is not licensed or has
had its license revoked by the Financial Industry Regulatory
Authority or the Department of Insurance for engaging in conduct
prohibited by those entities.
(c) The board shall establish an appeals process for vendors that
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 and 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.
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 opt-out form.
(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 opt-out form.
(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.
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 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.
100036. The state shall not have any liability for the payment of
the retirement savings benefit earned by 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 entities with whom the board contracts to provide an
insurance, annuity, or other funding mechanism to protect the value
of individuals' accounts pursuant to Section 100013. The state, and
any of the funds of the state, shall have no obligation for payment
of the benefits arising from this title.
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.
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 to initiate and complete the required
market analysis are made available through a nonprofit or private
entity, or from federal funding. The Secure Choice Retirement Savings
Program Fund is hereby created in the State Treasury. Moneys made
available to conduct the market analysis shall be deposited in this
fund. 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.
100042. With the exceptions of subdivision (a) of Section 100002,
and Sections 100040, 100043, and 100044, the provisions of this
title shall become operative only if the board determines that, based
on the market analysis, the provisions of this title will be
self-sustaining, and funds are made available through a nonprofit or
other private entity, federal funding, or an annual Budget Act
appropriation in amounts sufficient to allow the board to implement
this title until the trust has sufficient funds to be
self-sustaining.
100043. The board shall not implement the program if the IRA
arrangements offered fail to qualify for the favorable federal income
tax treatment ordinarily accorded to IRAs under the Internal Revenue
Code, or if it is determined that the program is an employee benefit
plan under the federal Employee Retirement Income Security Act.
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 opt-out form in the
employee information packet disseminated by the department 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.
(c) Each eligible employer that, without good cause, fails to
allow its eligible employees to participate in the California Secure
Choice Retirement Savings Program pursuant to Sections 100014 and
100032 of the Government Code, on or before 90 days after service of
notice by the director pursuant to Section 1206 of its 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 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 Employment Development 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.