BILL NUMBER: SB 1234	AMENDED
	BILL TEXT

	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, 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   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  an employer to use  
the opt-out form disseminated by  the Employment Development
Department  exemption certificate   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 study, develop, and obtain the approvals necessary
 to implement the program  and the board determines
that the program can   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. 
   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
  reliable  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   savings  they need for a secure
retirement.  California must pursue guaranteed replacement
income programs, including defined benefit plans, for all working
Californians.   Ideally, all private sector workers
would have access to employer-sponsored retirement plans, but over
6.3 million Califor   nia 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  universal  retirement
savings program  to   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  ensuring
  improving  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) 
    (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. 
   (j) 
    (g)  The California Secure Choice Retirement Savings
Trust established by this act will promote expanded retirement
security for working Californians. 
   (k) 
    (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 
creditable   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   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   low-cost  , and
portable manner.  The   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  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.  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  shall   may 
establish a segregated account within the program fund to be known as
the Gain and Loss Reserve Account  , and the  
. The  board shall have sole authority over the 
account   Gain and Loss Reserve Account, if established
 . The Gain and Loss Reserve Account  shall be
maintained for the program and  may be used to 
credit   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  crediting  
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) Individual accounts under the California Secure Choice
Retirement Savings Program shall be nominal accounts. 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) 
    (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 ma  nagement entity or entities  with
respect to the program to declare the stated rate at which interest
shall be  credited   allocated  to program
accounts for the following program year.
   (2) Interest shall be  credited   allocated
 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) 
    (c)  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.
   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  benefit   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  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.
   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
 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 their employees'   remit employees'
contributions to their  individual retirement accounts on their
employees'  behalf or match their employees' contributions,
  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. 
   (k) 
    (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.  
   (e) 
    (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. 
   (f) 
    (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 
individual retirement accounts and annuities   IRAs
   offered by private sector providers is made
available for consideration by eligible employers.
   (b) Vendors  who   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
 individual retirement accounts and annuities  
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  they register   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  who   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 
National Association of Securities Dealers   Financial
Industry Regulatory Authority  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   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  exemption certificate produced by the
Employment Development Department   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 
exemption certificate produced by the Employment Development
Department   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  that is guaranteed to
  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 
underwriters pursuant to the contract entered into with the board on
behalf of the program participants   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  guaranteed  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 thi
  s 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 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   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  department's
exemption certificate   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.  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   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  his or her   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 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.