BILL NUMBER: SB 262	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator De León

                        FEBRUARY 10, 2011

   An act relating to individual retirement accounts.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 262, as introduced, De León. Individual retirement accounts.
   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 make findings and declarations of the Legislature
that conclude that the state should create an additional retirement
savings program for its workers to supplement existing savings
options.
   Vote: majority. Appropriation: no. Fiscal committee: no.
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-sponsored retirement 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 plans 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 access to a plan after moving
into a new job with another 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 future financial stability through a secure, portable
savings account.
   (i) Individual retirement accounts (IRAs) are fully portable and
not tied to an employer, and an automatic enrollment option
significantly increases employee participation rates in retirement
savings plans.
   (j) 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 continue to explore
guaranteed replacement income programs, such as defined benefit
plans, for working Californians. Establishing and offering a defined
benefit plan would require additional study to research and address
the complex policies and regulatory approvals necessary for creation
and implementation, and would be an important step toward ensuring
the retirement security for all working Californians.
   (k) 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.
   (l) Private individuals have limited access to attractive
financial products that allow them to convert their savings into
secure, lifelong retirement income.
   (m) In creating an additional retirement savings program for its
workers, California should supplement existing savings options, thus
assisting California's working men and women to save for retirement.