BILL NUMBER: SB 1234 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 15, 2016
AMENDED IN SENATE MAY 31, 2016
AMENDED IN SENATE APRIL 5, 2016
INTRODUCED BY Senator De León
(Coauthor: Senator Beall)
FEBRUARY 18, 2016
An act to amend Sections 100000, 100002, 100004,
100008, 100010, 100012, 100014, 100032, and 100036
100034, 100036, and 100043, of, to add Sections 100046,
100048, 100049, and 100050 to, and to repeal Sections 100013, 100040,
100042, and 100043.5 of, the Government Code, and to amend
Section 12302.2 of the Welfare and Institutions 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 Retirement
Savings Program, administered by the California Secure Choice
Retirement Savings Investment Board, contingent on specified funding
and interest criteria being met. 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. 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.
This bill would express legislative approval of the program and
its implementation on January 1, 2017. The bill would require
the board, prior to opening the program for enrollment, to
make a report to the Governor and Legislature affirming that certain
requirements have been met, including that the program is structured
to meet a United States Department of Labor regulation, as
specified. 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 exempt the
California Secure Choice Retirement Savings Trust from specified
provisions regarding the qualification of securities for sale.
The bill would make various changes to existing duties of the board,
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 serve at 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.
This bill 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 would
define a provider of in-home supportive services as an employer if a
specified determination is made and would require the state or a
county that makes a direct payment to a provider to assume
obligations regarding retirement savings accounts, including payroll
deposit IRA arrangements offered under the program. The bill
would authorize the board to adjust the employee contribution amount
described above up to 5% and would prescribe other limits on
increasing employee contributions. 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. By authorizing the board to increase moneys that
are deposited into the California Secure Choice Retirement Savings
Trust, which is continuously appropriated, the bill would make an
appropriation. The bill would authorize the board to 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.
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. Section 100000 of the
Government Code is amended to read:
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) (1) "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.
(2) Upon a positive determination pursuant to paragraph (5) of
subdivision (a) of Section 100046, eligible employer means an
employer of a provider of in-home supportive services, as regulated
by Article 7 (commencing with Section 12300) of Chapter 3 of Part 3
of Division 9 of the Welfare and Institutions Code.
(e) "IRA" means an individual retirement account or individual
retirement annuity under Section 408(a) or 408(b) of Title 26 of the
United States Code.
(f) "Participating employer" means an eligible employer that
provides a payroll deposit retirement savings arrangement provided
for by this title for eligible employees.
(g) "Payroll deposit retirement savings arrangement" means an
arrangement by which an employer allows employees to remit payroll
deduction contributions to a retirement savings program.
(h) "Stated interest rate" means the rate of interest allocated to
program accounts as determined by the board pursuant to subdivision
(c) of Section 100008.
(i) "Trust" means the California Secure Choice Retirement Savings
Trust established by this title.
(j) "Vendor" means a registered investment company or admitted
life insurance company qualified to do business in California that
provides retirement investment products. "Vendor" also includes a
company that is registered to do business in California that provides
payroll services or recordkeeping services and offers retirement
plans or payroll deposit IRA arrangements using products of regulated
investment companies and insurance companies qualified to do
business in California. "Vendor" does not include individual
registered representatives, brokers, financial planners, or agents.
SECTION 1. SEC. 2. Section 100002 of
the Government Code is amended to read:
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 staff, including
contracted administrators and consultants, shall discharge their
duties as fiduciaries 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) Investment policy decisions, including asset allocation
and investment options, shall be entrusted to the board subject to
its fiduciary duties. 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, through
pooled investing, to leverage economies of scale, lower risks, and
provide participants with a stable and reasonable 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 risk management and oversight program shall include an
effective risk management system 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.
SEC. 2. SEC. 3. Section 100004 of
the Government Code is amended to read:
100004. (a) There is hereby established a retirement savings
trust known as the California Secure Choice Retirement Savings Trust
to be administered by the board for the purpose of promoting greater
retirement savings for California private employees in a convenient,
voluntary, low-cost, and portable manner. After sufficient funds are
made available for this title to be operative, 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 a California public 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.
(f) The California Secure Choice Retirement Savings Trust is an
instrumentality of the state. Any security issued, managed, or
invested by the California Secure Choice Retirement Savings
Investment Board within the California Secure Choice Retirement
Savings Trust on behalf of an individual participating within the
California Secure Choice Retirement Savings Program shall be exempt
from Sections 25110, 25120, and 25130 of the Corporation Code.
SEC. 3. SEC. 4. Section 100008 of
the Government Code is amended to read:
100008. The California Secure Choice Retirement Savings Program
shall include, as determined by the board, one or more payroll
deposit IRA arrangements.
SEC. 4. SEC. 5. Section 100010 of
the Government Code is amended to read:
100010. (a) The board 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 Contract with a program
administrator and determine the duties of the program
administrator and other staff as appropriate and set their
compensation. administrator. 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 appropriate 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.
(6) Make provisions for the payment of costs of administration and
operation of the trust. 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.
(7) Employ staff.
(8) Retain and contract with the board of a California public
retirement system, private financial institutions, other financial
and service providers, consultants, actuaries, counsel, auditors,
third-party administrators, and other professionals as necessary.
(9) Procure insurance against any loss in connection with the
property, assets, or activities of the trust, and secure private
underwriting and reinsurance to manage risk and insure the retirement
savings rate of return.
(10) Procure insurance indemnifying each member of the board from
personal loss or liability resulting from a member's action or
inaction as a member of the board.
(11) Set minimum and maximum investment levels in accordance with
contribution limits set for IRAs by the Internal Revenue Code.
(12) Collaborate and cooperate with the board of a California
public 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) Collaborate with, and evaluate the role of, insurance and
financial advisors in assisting and providing guidance for eligible
employers and eligible employees.
(14) 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.
(15) 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.
(16) 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 appropriate 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.
SEC. 5. SEC. 6. Section 100012 of
the Government Code is amended to read:
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 encourage 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 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.
(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.
SEC. 6. SEC. 7. Section 100013 of
the Government Code is repealed.
SEC. 7. SEC. 8. Section 100014 of
the Government Code is amended to read:
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 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.
SEC. 8. SEC. 9. 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 under the terms and conditions
prescribed by the board.
(b) Within 12 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) Within 24 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) Within 36 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) The board, in its discretion, may extend the time limits
defined in subdivisions (b) to (d), inclusive.
(f) (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.
(g) 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.
(h) 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.
(i) Unless otherwise specified by the employee, a participating
employee shall contribute 3 percent of the employee's annual salary
or wages to the program.
(j) By regulation, the board may adjust the contribution amount
set in subdivision (i) 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.
(k) The board may implement annual automatic escalation of
employee contributions.
(1) Employee contributions subject to automatic escalation shall
not exceed 8 percent of salary.
(2) Automatic escalation shall result in no more than a
1-percent-of-salary increase in employee contributions per calendar
year.
(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.
SEC. 10. Section 100034 of the
Government Code is amended to read:
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.
(d) An employer shall not have civil liability, and no cause of
action shall arise against an employer, for acting pursuant to the
regulations prescribed by the board defining the roles and
responsibilities of employers that have a payroll deposit retirement
savings arrangement to allow employee
participation in the program.
SEC. 9. SEC. 11. Section 100036 of
the Government Code is amended to read:
100036. The state shall not have any liability for the payment of
the retirement savings benefit earned by program participants
pursuant to this title. The state, and any of the funds of the state,
shall have no obligation for payment of the benefits arising from
this title.
SEC. 10. SEC. 12. Section 100040 of
the Government Code is repealed.
SEC. 11. SEC. 13. Section 100042 of
the Government Code is repealed.
SEC. 14. Section 100043 of the
Government Code is amended to read:
100043. (a) 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.
(b) (1) Prior to opening the program for enrollment, the board
shall report to the Governor and Legislature the specific date on
which the program will start to enroll program participants and that
the following prerequisites and requirements for the program have
been met:
(A) The United States Department of Labor has finalized a
regulation setting forth a safe harbor for savings arrangements
established by states for nongovernmental employees for the purposes
of the federal Employee Retirement Income Security Act.
(B) The program is structured in a manner to meet the criteria of
the United States Department of Labor regulation.
(C) The payroll deduction IRA arrangements offered by the program
qualify for the favorable federal income tax treatment ordinarily
accorded to IRA arrangements under the Internal Revenue Code.
(D) The board has defined in regulation the roles and
responsibilities of employers pursuant to the criteria outlined in
the United States Department of Labor regulation described in
paragraph (2) and any associated guidance.
(E) The board has adopted an operational model that limits
employer interaction and transactions with the employee to the extent
feasible.
(2) The report required by paragraph (1) shall be submitted in
compliance with Section 9795.
SEC. 12. SEC. 15. Section 100043.5
of the Government Code is repealed.
SEC. 13. SEC. 16. Section 100046 is
added to the Government Code, to read:
100046. (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 a provider of in-home
supportive services, as regulated by Article 7 (commencing with
Section 12300) of Chapter 3 of Part 3 of Division 9 of the Welfare
and Institutions Code 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.
(9) The board shall include comprehensive worker education and
outreach, outreach in the program, and
the board may collaborate with state and local government agencies,
community-based and nonprofit organizations, foundations, vendors,
and other entities deemed appropriate to develop and secure ongoing
resources for education and outreach that reflect the cultures and
languages of the state's diverse workforce population.
(10) The board shall include comprehensive employer education and
outreach in the program, with an emphasis on employers with less than
100 employees, developed in consultation with employer
representatives, with the integration of the following components:
(A) A program Web site to assist the employers of participating
employees.
(B) A toll-free help line for employers with live and automated
assistance.
(C) Online Web training.
(D) Live presentations to business associations.
(E) Targeted outreach to small businesses with 10 or less
employees.
(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.
SEC. 14. SEC. 17. Section 100048 is
added to the Government Code, to read:
100048. 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.
SEC. 15. SEC. 18. Section 100049 is
added to the Government Code, to read:
100049. A payroll deposit IRA arrangement offered pursuant to the
California Secure Choice Retirement Savings Program shall have the
same status as, and be treated consistently with, any other IRA
qualified under Section 408(a) or 408(b) of the United States Code
for the purpose of determining eligibility or benefit level for a
program that uses a means test.
SEC. 16. SEC. 19. Section 100050 is
added to the Government Code, to read:
100050. 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.
SEC. 20. Section 12302.2 of the Welfare
and Institutions Code is amended to read:
12302.2. (a) (1) If the state or a county makes or provides for
direct payment to a provider chosen by a recipient or to the
recipient for the purchase of in-home supportive services, the
department shall perform or assure the performance of all rights,
duties and obligations of the recipient relating to those services as
required for purposes of unemployment compensation, unemployment
compensation disability benefits, workers' compensation,
retirement savings accounts, including payroll deposit IRA
arrangements offered pursuant to the California Secure Choice
Retirement Savings Program (Title 21 (commencing with Section 100000)
of the Government Code), federal and state income tax, and
federal old-age survivors and disability insurance benefits. Those
rights, duties, and obligations include, but are not limited to,
registration and obtaining employer account numbers, providing
information, notices, and reports, making applications and returns,
and withholding in trust from the payments made to or on behalf of a
recipient amounts to be withheld from the wages of the provider by
the recipient as an employer, including the sales tax extended to
support services by Article 4 (commencing with Section 6150) of
Chapter 2 of Part 1 of Division 2 of the Revenue and Taxation Code,
and transmitting those amounts along with amounts required for all
contributions, premiums, and taxes payable by the recipient as the
employer to the appropriate person or state or federal agency. The
department may assure the performance of any or all of these rights,
duties, and obligations by contract with any person, or any public or
private agency.
(2) Contributions, premiums, and taxes shall be paid or
transmitted on the recipient's behalf as the employer for any period
commencing on or after January 1, 1978, except that contributions,
premiums, and taxes for federal and state income taxes and federal
old-age, survivors and disability insurance contributions shall be
paid or transmitted pursuant to this section commencing with the
first full month that begins 90 days after the effective date of this
section.
(3) Contributions, premiums, and taxes paid or transmitted on the
recipient's behalf for unemployment compensation, workers'
compensation, and the employer's share of federal old-age survivors
and disability insurance benefits shall be payable in addition to the
maximum monthly amount established pursuant to Section 12303.5 or
subdivision (a) of Section 12304 or other amount payable to or on
behalf of a recipient. Contributions, premiums, or taxes resulting
from liability incurred by the recipient as employer for unemployment
compensation, workers' compensation, and federal old-age, survivors
and disability insurance benefits with respect to any period
commencing on or after January 1, 1978, and ending on or before the
effective date of this section shall also be payable in addition to
the maximum monthly amount established pursuant to Section 12303.5 or
subdivision (a) of Section 12304 or other amount payable to or on
behalf of the recipient. Nothing in this section shall be construed
to permit any interference with the recipient's right to select the
provider of services or to authorize a charge for administrative
costs against any amount payable to or on behalf of a recipient.
(b) If the state makes or provides for direct payment to a
provider chosen by a recipient, the Controller shall make any
deductions from the wages of in-home supportive services personnel
that are authorized by Sections 1152 and 1153 of the Government Code,
as limited by Section 3515.6 of the Government Code, and for the
sales tax extended to support services by Article 4 (commencing with
Section 6150) of Chapter 2 of Part 1 of Division 2 of the Revenue and
Taxation Code.
(c) Funding for the costs of administering this section and for
contributions, premiums, and taxes paid or transmitted on the
recipient's behalf as an employer pursuant to this section shall
qualify, where possible, for the maximum federal reimbursement. To
the extent that federal funds are inadequate, notwithstanding Section
12306, the state shall provide funding for the purposes of this
section.