Amended in Senate April 5, 2016

Senate Bill No. 1234

Introduced by Senator De León

February 18, 2016

An act to amend begin delete Section 100032 of end delete begin insert Sections 100002, 100004, 100008, 100010, 100012, 100014, 100032, and 100036 of, to add Sections 100046, 100048, and 100050 to, and to repeal Sections 100013, 100040, 100042, and 100043.5 of, end insert the Government 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. Existing law, the California Secure Choice Retirement Savings Trust Act, establishes the California Secure Choice Savings Program, administered by the California Secure Choice Retirement Savings Investment Board, contingent on specified funding and interest criteria being met. begin insert Existing law prescribes the composition of the board and its duties and provides that it acts as trustee in entering contracts and accepting moneys, among other things. Existing law prohibits the board from permitting enrollment in the program until enactment of a statute expressing legislative approval of program implementation. end insert The program requires specified eligible employers, as defined, to offer a payroll deposit retirement savings arrangement and requires eligible employees, as defined, who do not opt out of the program, to contribute a portion of their salary or wages to a retirement savings account in the program, as specified. Existing law requires contributions from the wages of employees participating in the program to be deposited in the California Secure Choice Retirement Savings Trust, which is continuously appropriated and administered by the board. Existing law authorizes the board to adjust the employee contribution amount between 2% and 4%, inclusive, of the employee’s annual salary or wages, as specified.

begin insert

This bill would express legislative approval of the program and its implementation on January 1, 2017. The bill would require the board to design and implement the program and would prescribe certain parameters that the board is to consider and utilize in establishing the design. The bill would specify that funding and first year administrative costs may be appropriated in the annual budget from the General Fund and would require the board to repay the amount appropriated, plus interest, as specified. The bill would provide that investment policy decisions, including asset allocation and investment options, are entrusted to the board as a fiduciary, and would revise certain principles that the board is to consider in connection with investment policy. The bill would make various changes to existing duties of the broad, including those regarding dissemination of information and the entities with which the board is to collaborate and cooperate. The bill would require the Treasurer to appoint an executive director of the board, to service its pleasure, and to determine the duties of the office and its compensation. The bill would eliminate the duty of the board to ensure that insurance or some other mechanism is in place to protect the value of individual accounts. The bill would repeal the duty of the board to conduct an initial market analysis to determine if the condition for the implementation of the program can be met and associated provisions.

end insert

This bill begin insert would require eligible employers that do not offer specified retirement plans or accounts to have a payroll deposit retirement savings arrangement so that employees may participate in the program within specified time periods based on the number of eligible employees that the employer has, and the bill would authorize the board to extend these time periods. The bill end insert would authorize the board to adjust the employee contribution amount begin insert described above end insert up to 5%. begin insert The bill would authorize the board to make annual, automatic escalations of employee contributions subject to certain limitations, including that the employee may opt out, as specified. end insert By authorizing the board to increase begin delete the amount of money that is end delete begin insert moneys that are end insert deposited into the California Secure Choice Retirement Savings Trust, which is continuously appropriated, the bill would make an appropriation. begin insert The bill would authorize the board to end insert begin insert adopt regulations to implement the program and would provide that the adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency. The bill would make various conforming changes. end insert

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 100002 of the end insert begin insert Government Code end insert begin insert is
amended to read: end insert

100002.  

(a) (1) There is hereby created within state
government the California Secure Choice Retirement Savings
Investment Board, which shall consist of nine 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) An employee representative appointed by the Speaker of
the Assembly.

(F) A small business representative appointed by the Governor.

(G) A public member appointed by the Governor.

(H) Two additional members appointed by the Governor.

(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 begin delete staff end delete begin insert staff,
including contracted administrators and consultants, end insert shall
discharge their duties begin insert as fiduciaries end insert 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)  begin insert Investment policy decisions, including asset allocation
and investment options, shall be entrusted to the board subject to
its fiduciary duties. end insert 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 begin delete is to preserve
the safety of principal and provide a stable and low-risk end delete begin insert is, through
pooled investing, to extend investment horizons, lower risks, and
provide participants with a stable and reasonable end insert 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.

begin delete

(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)

end delete

begin insert (3 end insert begin insert ) end insert  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.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 100004 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

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 begin delete operative
pursuant to Section 100042, end delete begin insert operative, end insert 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.

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 100008 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

100008.  

begin delete (a) end delete begin delete   end delete The California Secure Choice Retirement Savings
Program shall include, as determined by the board, one or more
payroll deposit IRA arrangements.

begin delete

(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.

end delete

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 100010 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

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 begin delete 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, end delete
begin insert administrator end insert and determine the duties of the program
administrator and other staff as necessary and set their
compensation. begin insert end insert begin insert The Treasurer shall, on behalf of the board, appoint
an executive director, who shall not be a member of the board and
who shall serve at the pleasure of the board. The Treasurer shall
determine the duties of the executive director and other staff as
necessary and set his or her compensation. The board may
authorize the executive director to enter into contracts on behalf
of the board or conduct any business necessary for the efficient
operation of the board. end insert

(6) Make provisions for the payment of costs of administration
and operation of the trust. begin insert The costs of the program administrator
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. end insert

(7) Employ staff.

(8) Retain and contract with the begin delete Board of Administration of the
Public Employees’ Retirement System, end delete begin insert end insert begin insert board of a California
public retirement system, end insert 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 begin delete Board of Administration
of the Public Employees’ Retirement System, end delete begin insert board of a California
public retirement system, end insert 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.

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 100012 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

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 begin delete concerning saving and
planning for retirement. end delete begin insert designed to educate participants about
the benefits of planning and saving for retirement and information
to help them decide the level of California Secure Choice
Retirement Savings Program participation and savings strategies
that may be appropriate for them. end insert

(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.

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Section 100013 of the end insert begin insert Government Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 100014 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

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 begin delete is privately insured and end delete 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.

begin delete SECTION 1. end delete

begin insert SEC. 8. end insert   

Section 100032 of the Government Code is amended
to read:

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)  begin delete Beginning three months end delete begin insert Within 12 months end insert 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)  begin delete Beginning six months end delete begin insert Within 24 months end insert 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)  begin delete Beginning nine months end delete begin insert Within 36 months end insert 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.

begin insert

(e) The board, in its discretion, may extend the time limits
defined in subdivisions (b) to (d), inclusive.

end insert begin delete

(e)

end delete

begin insert (f) end insert  (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.

begin delete

(f)

end delete

begin insert (g) end insert  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.

begin delete

(g)

end delete

begin insert (h) end insert  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.

begin delete

(h)

end delete

begin insert (i) end insert  Unless otherwise specified by the employee, a participating
employee shall contribute 3 percent of the employee’s annual
salary or wages to the program.

begin delete

(i)

end delete

begin insert (j) end insert  By regulation, the board may adjust the contribution amount
set in subdivision begin delete (h) end delete begin insert (i) end insert to no less than 2 percent and no more than
5 percent and may vary that amount within that 2 percent to 5
percent range for participating employees according to the length
of time the employee has contributed to the program.

begin insert

(k) The Board may implement annual automatic escalation of
employee contributions.

end insert begin insert

(1) Employee contributions subject to automatic escalation shall
not exceed 8 percent of salary.

end insert begin insert

(2) Automatic escalation shall result in no more than a 1-percent
increase in employee contributions per calendar year.

end insert begin insert

(3) A participating employee may elect to opt out of automatic
escalation and may set his or her contribution percentage rate at
a level determined by the participating employee.

end insert

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 100036 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

100036.  

The state shall not have any liability for the payment
of the retirement savings benefit earned by program participants
pursuant to this title. begin delete 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. end delete The state,
and any of the funds of the state, shall have no obligation for
payment of the benefits arising from this title.

begin insert

begin insert SEC. 10. end insert   

end insert

begin insert Section 100040 of the end insert begin insert Government Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 11. end insert   

end insert

begin insert Section 100042 of the end insert begin insert Government Code end insert begin insert is repealed. end insert

begin delete

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.

end delete

begin insert

begin insert SEC. 12. end insert   

end insert

begin insert Section 100043.5 of the end insert begin insert Government Code end insert begin insert is repealed. end insert

begin delete

100043.5.  

The board shall not open the program for enrollment
until a subsequent authorizing statute is enacted that expresses the
approval of the Legislature for the program to be fully
implemented.

end delete

begin insert

begin insert SEC. 13. end insert   

end insert

begin insert Section 100046 is added to the end insert begin insert Government Code end insert begin insert , to
read: end insert

begin insert

begin insert 100046. end insert   

(a) Based upon findings and recommendations of the
board pursuant to Section 100040, the California Secure Choice
Retirement Savings Program is approved by the Legislature and
implemented as of January 1, 2017. The board, subject to its
authority and fiduciary duty, shall design and implement the
California Secure Choice Retirement Savings Program. The board
shall consider and utilize the following parameters in designing
the program:

(1) For up to three years, the board may establish managed
accounts invested in United States Treasuries or similarly safe
investments. During this time, the board may develop investment
options that address risk-sharing and smoothing of market losses
and gains. Options may include, but are not limited to, custom
pooled, professionally managed funds that minimize costs and
fees, the creation of a reserve fund, or the establishment of
investment products.

(2) The board shall seek to minimize participant fees.

(3) The board shall strive to implement program features that
provide maximum possible income replacement balanced with
appropriate risk in an IRA-based environment.

(4) The board shall determine the default payout method for
retirees.

(5) The board shall include quasi-public and quasi-private
employees in the program if the board determines the inclusion to
be legally permissible under federal and state laws and regulations.

(6) The board shall structure the program so as to ensure the
state is prohibited from incurring liabilities associated with
administering the program and that the state has no liability for
the program or its investments.

(7) The board shall determine necessary costs associated with
outreach, customer service, enforcement, staffing and consultant
costs, and all other costs necessary to administer the program.

(8) The board shall partner with employer representatives to
create an administrative structure that ensures employee
participation while addressing employer needs, including, but not
limited to, clearly defining employers’ duties and liability
exemption pursuant to Section 100034.

(b) In order to ensure timely implementation of the California
Secure Choice Retirement Savings Program, the board shall have
flexibility in designing and implementing the California Secure
Choice Retirement Savings Program. The program parameters
set forth in this section shall not be conclusive. The board shall
have the authority to augment these requirements as necessary to
fully implement the program and comply with the board’s fiduciary
duties.

end insert

begin insert

begin insert SEC. 14. end insert   

end insert

begin insert Section 100048 is added to the end insert begin insert Government Code end insert begin insert , to
read: end insert

begin insert

begin insert 100048. end insert   

The board may adopt regulations to implement this
title. The adoption, amendment, repeal, or readoption of a
regulation authorized by this section is deemed to address an
emergency, for purposes of Sections 11346.1 and 11349.6, and
the board is hereby exempted for this purpose from the
requirements of subdivision (b) of Section 11346.1.

end insert

begin insert

begin insert SEC. 15. end insert   

end insert

begin insert Section 10050 is added to the end insert begin insert Government Code end insert begin insert , to
read: end insert

begin insert

begin insert 10050. end insert   

Funding for startup and first-year administrative costs
may be appropriated from the General Fund in the annual Budget
Act. The board shall repay the amount appropriated, plus interest
calculated at the rate earned by the Pooled Money Investment
Account. Necessary administrative costs in future years shall be
paid out of the administrative fund.

end insert