BILL NUMBER: AB 2940	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JULY 10, 2008
	AMENDED IN SENATE  JUNE 17, 2008
	AMENDED IN ASSEMBLY  MAY 23, 2008
	AMENDED IN ASSEMBLY  APRIL 10, 2008
	AMENDED IN ASSEMBLY  APRIL 3, 2008

INTRODUCED BY   Assembly Member De Leon
   (Principal coauthors: Assembly Members Carter, Coto, Hernandez,
Lieu, and Ma)
    (   Coauthor:   Assembly Member  
Eng   ) 
    (  Coauthor:   Senator   Cedillo
  ) 

                        FEBRUARY 22, 2008

   An act to amend Section 21670 of, and to add Title 25 (commencing
with Section 100000) to, the Government Code, relating to retirement.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2940, as amended, De Leon. Retirement: California Employee
Savings Program.
   (1) 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 create the California Employee Savings Program,
which would be operative only upon a specified appropriation in the
annual Budget Act  or if sufficient funds are made available
through a nonprofit or private entity, as specified  . The
program would be administered by the Board of Administration of the
Public Employees' Retirement System (PERS), with the intent of
promoting greater retirement savings for California private employees
in a convenient, low-cost, and portable manner. The bill would
require the board, under this program, to offer one or more
individual retirement accounts  or defined benefit plans  ,
as specified, to eligible employees of participating eligible
employers, as defined. The bill would specify that eligible employees
of participating employers are not members of PERS. The bill would
permit the board  ,  in initiating and administering the
program  ,  to, among other things, employ staff and
3rd-party administrators, as necessary, collaborate with various
entities in the private sector, recover expenses from contributions
or investment returns, as specified, and create a process to require
a participating employer to forward employee contributions to the
program through the Employment Development Department system
currently used to collect payroll taxes. The bill would require the
Employment Development Department to cooperate in this regard. The
bill would authorize the Employment Development Department to seek
reimbursement for any administrative costs associated with
implementing the program. The bill would require the board to make
reports to employers on the progress and status of the program.
   The bill would also require the board to make specified reports to
the Legislature, including a report  at least 90 days prior
to implementing the program   , upon determining that
all specified conditions necessary to implement the program can be
satisfied  , a report if it finds that the program is not
self-sustaining, and annual reports on the status of the program, as
specified. The bill would require the board to keep program funds and
accounts separate from those of PERS and would prohibit the use of
funds in PERS, as specified, to implement or administer the program.
In addition, the bill would require that all expenses and obligations
created by the program be funded by its contributions, returns, and
assets, except as the Legislature may appropriate funds for this
purpose, to be deposited in the California Employee Savings Program
Administrative Fund, which this bill would establish as a
continuously appropriated fund. The bill would require PERS to obtain
the necessary approvals from federal authorities for the program's
implementation. The bill would prohibit any claim, tax lien, or other
right of set off from applying to funds or assets of the program, as
specified. The bill would indemnify from the General Fund and hold
harmless the present, former, and future board members, officers,
employees of, and investment managers under contract with, PERS in
connection with any decision or action related to the administration
of the program. The bill would provide that the program may only be
implemented if the board determines that certain conditions are
satisfied, and would permit the board to discontinue the program on
its determination, as specified. The bill would permit the board to
adopt regulations in regard to the program, and would provide that
the adoption, amendment, or repeal of a regulation is exempted from
the rulemaking provisions of the Administrative Procedure Act. The
bill would also make a statement of findings.
   (2) Existing law authorizes the PERS Board of Administration to
establish a deferred compensation program for California public
employees. The board is required to make the program available to all
employees of an employer, as defined, under procedures established
by the board, except as specified.
   This bill would extend the availability of this program to include
state employees.
   Vote: majority. Appropriation: no. 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) Currently, 6 million Californians, 43 percent of the state's
workforce, work at a job that does not offer them a pension or
retirement savings plan to supplement social security.
   (b) Social security payments alone, which average $1,081 per month
in California, will not sustain Californians in their retirement.
Seniors without savings may be more likely to require government
assistance with housing, medical care, and other necessities.
   (c) Though investments in savings accounts have increased over
time, investments from low-income small businesses, or short-tenured
and transient employees, are strikingly low and have not increased at
the same rate.
   (d) Nationally, two out of three low-wage workers lack access to
an employer-sponsored retirement plan, while only one in four
high-wage workers do. Nearly 65 percent of low-income workers, those
earning less than $40,000 per year, do not participate in employer
plans, according to the Congressional Budget Office.
   (e) Only 26 percent of full-time, full-year private sector workers
in businesses with fewer than 25 employees participated in a pension
plan in 2004, compared with 69 percent of those employed by
companies with 500 or more employees. Complexity and cost of
administering retirement systems may prevent small companies, in
comparison to larger corporations, from creating retirement plans for
their employees.
   (f) Low investment participation rates in retirement plans can
also be attributed to a worker losing coverage access after moving
into a new job with a new business.
   (g) Workers today are spending more than they are saving, relying
more on credit, and thus accruing debt and putting their future
financial security at risk. Nationally, the personal savings rate for
individuals has fallen to 0.5 percent of income for 2007. At this
rate, even with social security benefits, Californians will not be
able to afford retirement.
   (h) 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 financial stability and future through a secure,
portable savings account.
   (i) In creating this system, California would supplement existing
savings options, at no cost to taxpayers.
   (j) The California Employee Savings Program is hereby established
by this act to promote expanded retirement security for working
Californians' employers' sponsorship of retirement plans for their
employees.
  SEC. 2.  Section 21670 of the Government Code is amended to read:
   21670.  The board may establish a deferred compensation program
for California public employees. The program shall be made available
to all state employees and to all employees of an employer under
procedures established by the board unless participation is subject
to the terms of any memorandums of understanding between the employer
and the employees.
  SEC. 3.  Title 25 (commencing with Section 100000) is added to the
Government Code, to read:

      TITLE 25.  CALIFORNIA EMPLOYEE SAVINGS PROGRAM


   100000.  For purposes of this title:
   (a) "Board" means the Board of Administration of the Public
Employees' Retirement System.
   (b) "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, but excluding the state,
any county, any municipal corporation, or any of its units or
instrumentalities, and that satisfies the requirements to establish
or participate in a SIMPLE plan or a payroll deposit IRA arrangement.
An eligible employer shall only provide services under the program
to eligible employees. An eligible employer does not include any
employer to the extent that the employer replaces a preexisting
retirement plan with a plan provided for by this title.
   (c) "Eligible employee" means a person who is an employee of an
eligible employer.
   (d) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
   (e) "IRA" means an individual retirement account or individual
retirement annuity under Section 408 or 408A of the Internal Revenue
Code of 1986.
   (f) "Participating employer" means an eligible employer that
maintains or participates in a plan or payroll deposit IRA
arrangement provided for by this title for eligible employees.
   (g) "Payroll deposit IRA arrangement" means an arrangement by
which an employer makes its payroll system available to employees as
a conduit for transferring salary reduction contributions to IRAs.
   (h) "Program" means the California Employee Savings Program
established by this title.
   (i) "SIMPLE plan" means a SIMPLE IRA program under Section 408(p)
of the Internal Revenue Code of 1986.
   (j) "System" means the Public Employees' Retirement System.
   100002.  (a) There is hereby established a retirement savings
program known as the California Employee Savings Program to be
administered by the board with the intent of promoting greater
retirement savings for California private employees in a convenient,
low-cost, and portable manner. The California Employee Savings
Program is a voluntary, universal, portable retirement account for
California private employees.
   (b) The program shall include, as determined by the board, one or
more of the following components: 
   (1) One or more payroll deposit IRA arrangements for the employees
of participating employers.  
   (2) One or more traditional IRA arrangements.  
   (3) One or more SIMPLE IRA plans for the employees of
participating employers.  
   (4) Other IRAs for employees of participating employers. 

   (1) One or more payroll deposit IRA arrangements.  
   (2) One or more traditional IRA arrangements.  
   (3) One or more SIMPLE IRA plans.  
   (4) Other IRAs.  
   (5) Defined benefit plans. 
   (c) Pursuant to the authority granted under this title, the board
may establish the following:
   (1) Prototype or master and prototype plans or IRAs.
   (2) Multiple employer plans.
   (3) Group administrative service arrangements that allow eligible
employers to achieve economies of scale with respect to their
retirement savings arrangements relating to investment, accounting,
payroll processing, employee communications, and investor education.
   (4) Group investment vehicles for the plans or IRAs.
   (5) Custodial or trustee arrangements for payroll deposit programs
or for other plans or IRAs.
   (d) Participating employers and their eligible employees do not
become members of, or participants in, the Public Employees'
Retirement System. The California Employee Savings Program does not
create a new or separate public pension or retirement system.
   100004.  To initiate, implement, maintain, and administer the
program, the board may:
   (a) Employ staff.
   (b) Retain and contract with private financial institutions, other
financial and service providers, consultants, third-party
administrators, and other professionals as necessary, without regard
to provisions regarding competitive bidding.
   (c) Collaborate and cooperate with private financial institutions,
service providers, business, financial, trade, membership, and other
organizations to the extent necessary or desirable for the effective
and efficient implementation of the program and to maximize outreach
to eligible employers and eligible employees.
   (d) Cause expenses incurred to initiate, implement, maintain, and
administer the program, to be paid from contributions to, or
investment returns or assets of the program or plans or IRAs
established under the program, to the extent permitted under federal
law, except for expenditures that are provided for through
appropriations from the Legislature.
   (e) Facilitate compliance by the plans and IRAs established under
the program with all applicable requirements for the plans under the
Internal Revenue Code of 1986, including tax qualification
requirements or any other applicable law and accounting requirements,
including providing or arranging for assistance to plan sponsors and
individuals in complying with applicable law and tax qualification
requirements in a cost-effective manner.
   (f) Cause the IRA plans or arrangements established under the
program to be designed, established, and operated:
   (1) In accordance with best practices for retirement savings
vehicles.
   (2) To maximize participation, saving, and sound investment
practices, and to encourage the use of automatic features, including,
but not limited to, automatic enrollment and appropriate selection
of default investments.
   (3) With simplicity, ease of administration for participating
employers, and portability of benefits.
   (g) Seek to minimize costs by assisting or facilitating the
pooling of small employers and individuals in purchasing retirement
savings plans, arrangements, and investments, and through economies
of scale, standardization, designation of investment types, and other
measures.
   (h) Arrange for collective, common, and pooled investment of
assets of the IRA plans or arrangements, including investment 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, but only to the extent that
these collective investment arrangements would not jeopardize or
alter the current exemptions from ERISA and federal securities laws
of the plans maintained by the system and administered by the board
for state and local government employers and employees. Nothing in
this subdivision shall adversely affect or otherwise compromise the
system's ability to comply with applicable federal and state law and
conditions for favorable tax  treatment .
   (i) Disseminate educational information concerning saving and
planning for retirement to eligible employers and employees.
   (j) Disseminate information concerning the tax credits available
to small business owners for establishing new retirement plans and
the federal saver's tax credit available to moderate- and lower
income households for saving in plans and IRAs to eligible employers
and eligible employees.
   (k) Submit progress and status reports to participating employers
and eligible employees.
   (l) If necessary, determine the eligibility of an employer,
employee, or other individual to participate in the program.
   (m) Create for eligible employees of participating employers who
want to contribute a portion of their paycheck to a plan or account
offered by the program a process by which they are able to notify
their employers, either at the time of hiring or thereafter, and
require the participating employer to forward the employee
contribution to the program through the Employment Development
Department system currently used to collect payroll taxes. In this
case, the Employment Development Department shall cooperate by
forwarding the employee contribution to the IRA plan or arrangement
under the program.
   (n) Subject to the conditions specified in Section 100014, allow
participating employers to use the program to contribute to the
account on their employees' behalf or match their employees'
contribution.
   100005.  In the event the Employment Development Department
participates in the implementation and administration of the program,
it may seek reimbursement for any administrative costs associated
with implementing the program.
   100005.5.  (a) The board shall keep separate and distinct any and
all IRA plans or arrangements established under the program,
including any and all funds or accounts of those IRA plans or
arrangements, from all programs, funds, or assets maintained by the
system and administered by the board for state and local government
employers and employees. No funds in the system's defined benefit
plans, health and welfare plans, or its supplemental income plans for
state and local government employers and employees shall be used to
 implement   initiate, develop, implement, 
or administer the program.
   (b) All expenses and obligations created by, or pursuant to, the
program shall be funded solely from contributions to, or investment
returns or assets of, the programs, accounts,  or 
IRA plans or arrangements  , or defined benefit plan arrangements
 established under the program, except as the Legislature may
provide for funding through appropriation which shall be deposited in
the California Employee Savings Program Administrative Fund
established pursuant to Section 100016.
   100006.  The board shall obtain the necessary approvals, rulings,
opinions, determinations, or confirmations from federal authorities
or agencies, including the Internal Revenue Service, Department of
Labor, or Securities and Exchange Commission. It is intended that the
IRA plans or arrangements established under the program shall adhere
to all applicable standards and requirements under federal law
regulating the operation of, and the offering, sale, or distribution
of securities under, those plans or arrangements.
   100008.  No claim, tax lien, or other right of setoff of the state
or any of its agencies or instrumentalities shall apply against any
funds or assets held for the benefit of individuals in a plan or IRA
under the program or coming into the possession of a state official
under the program.
   100010.  No claim, tax lien, or other right of setoff of the state
or any of its agencies or instrumentalities shall apply against any
funds or assets administered by the board for the purpose of
providing pension, long-term care, or health benefits for employees
of the state or contracting agencies, by reason of any decision or
action related to the initiation, implementation, maintenance, or
administration of the program.
   100012.  Present, future, and former board members of the Public
Employees' Retirement System, jointly and individually, state
officers and employees, and investment managers under contract with
the Public Employees' Retirement System shall be indemnified from the
General Fund and held harmless by the State of California from all
claims, demands, suits, actions, damages, judgments, costs, charges,
and expenses, including court costs and attorney's fees, and against
all liability, losses, and damages of any nature whatsoever that they
shall or may at any time sustain by reason of any decision or action
related to the initiation, implementation, maintenance, or
administration of the program.
   100014.  (a) The program may only be implemented if the board
determines the following conditions are satisfied:
   (1) There is an adequate appropriation or loan under appropriate
terms and conditions to the California Employee Savings Program
Administrative Fund sufficient to fund program development,
implementation, and administrative costs.
   (2) Approval satisfactory to the board is received from agencies
or departments of the United States government, including, but not
limited to, the Internal Revenue Service, the United States
Department of Labor, and the Securities and Exchange Commission that
both of the following are true:
   (A) The IRA plans or arrangements offered under the program do not
jeopardize or alter the current status of the system with respect to
its operations under relevant federal laws.
   (B) Any payroll deposit IRA arrangement offered under the program
is not subject to ERISA.
   (3) The board obtains offers from well-qualified and experienced
financial service providers to administer the recordkeeping,
investment, and compliance functions of any IRA plan or arrangement
offered under the program.
   (4) The program will be self-sustaining. 
   (b) If the board determines that all of the conditions in
subdivision (a) can be satisfied, it shall file a report with the
Legislature pursuant to paragraph (1) of subdivision (a) of Section
100017.  
   (b) 
    (c)  If the board determines that any of the conditions
in subdivision (a) cannot be satisfied, the program shall not be
implemented. If, at any time after initial implementation, any of the
conditions set forth in subdivision (a) are not satisfied, the board
may discontinue the program. In either instance, the board shall
file a report with the Legislature pursuant to paragraph (2) of
subdivision (a) of Section 100017. 
   (d) If, subsequent to the program's implementation, any
traditional or payroll deposit IRA arrangement offered pursuant to
the program becomes subject to ERISA, or the board determines in its
discretion that it may be feasible to offer another plan or
arrangement authorized by subdivision (b) of Section 100002, the
board shall have the sole discretion to determine whether it shall
establish or maintain the plan or arrangement that is subject to
ERISA, and in no event shall the board be required to establish or
maintain that plan or arrangement. 
   100016.  (a) The California Employee Savings Program
Administrative Fund is hereby established to serve as the repository
of funds received by the program for administrative expenses pursuant
to this title.
   (b) Notwithstanding Section 13340 of the Government Code, all
moneys in the California Employee Savings Fund shall be continuously
appropriated without regard to fiscal years to carry out the purposes
of this title.
   (c) The board may establish multiple accounts within the
California Employee Savings Program Administrative Fund to assist in
the allocation of funds for various program needs and functions,
including administration, operation, and reserve.
   100017.  The board shall submit reports to the Legislature, as
follows:
   (a) (1)  The board shall submit a report to the
Legislature at least 90 days prior to implementing the program. This
report shall   Upon determining that all the conditions
necessary to implement the program under subdivision (a) of Section
100014 can be satisfied, the board shall submit a report to the
Legislature that shall  include, but not be limited to,
information regarding the expectations of the program, an outline of
the program, and details regarding  administration of the
program   the administration and projected cost of the
program. The board shall not implement the program until after the
report is presented to the Legislature, and moneys in an amount
sufficient to fund the projected cost of the program are either
appropriated by the Legislature in an annual Budget Act or made
available through a nonprofit or private entity  .
   (2) If the board concludes that the program will not be
self-sustaining, or if the necessary conditions specified in
subdivision (a) of Section 100014 are not satisfied, the board shall
submit a report to the Legislature regarding the details of its
conclusion, including, but not limited to, legal, financial,
regulatory, and administrative considerations and obstacles, and
actions taken to address those concerns. This report shall also
include any changes that the board believes that the Legislature
could make in order to implement the program.
   (b) The board shall submit annual reports to the Legislature on
the status of the program, including, but not limited to, outreach,
investments, and solvency efforts.
   (c) If the board finds it necessary to suspend or discontinue the
program, it shall submit a report to the Legislature at least 90 days
prior to that suspension or discontinuation. This report shall
include, but is not limited to, any conditional changes that need to
be made by the Legislature in order to continue the program.
   100018.  The board may adopt regulations that implement this
title. The adoption, amendment, or repeal of a regulation authorized
by this section is hereby exempted from the rulemaking provisions of
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2. However, the board
shall transmit those regulations to the Office of Administrative Law
for filing with the Secretary of State and publication in the
California Code of Regulations. Those regulations shall become
effective immediately upon filing with the Secretary of State.
   100019.  This title shall become operative only if an annual
Budget Act appropriates moneys  in amounts sufficient to
implement this title   or funds are made available
through a nonprofit or private entity, in amounts sufficient to allow
the board to initiate, study, develop, and obtain the approvals
necessary to implement the program pursuant to the conditions in
subdivision (a) of Section 100014  . Existing assets, resources,
and personnel administered by the board  may  
shall  not be used to develop, initiate, implement, or
administer the program without that appropriation  or outside
funding  .