Amended in Assembly August 15, 2016

Amended in Assembly June 15, 2016

Amended in Senate May 31, 2016

Amended in Senate April 5, 2016

Senate Bill No. 1234

Introduced by Senator De León

begin delete

(Coauthor: Senator Beall)

end delete begin insert

(Principal coauthor: Assembly Member Gatto)

end insert begin insert

(Coauthors: Senators Beall, Hall, Hertzberg, Leno, and Pan)

end insert begin insert

(Coauthors: Assembly Members Dodd, Cristina Garcia, Gonzalez, McCarty, and Williams)

end insert

February 18, 2016

An act to amend Sections 100000, 100002, 100004, 100008, 100010, 100012, 100014, 100032, 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. begin insert The bill would require the board, for up to 3 years following implementation, to establish managed accounts invested in United States Treasury securities, in myRAs, as defined, or in similar investments and would make conforming changes in this connection in provisions related to mitigating risk in the investment portfolio and payment of the costs of administration. The bill would require the board, after this period, to annually prepare and adopt a written statement of investment policy containing specified elements. The bill would require the board to consider the statement and any changes in the investment policy at a public hearing. end insert 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. begin insert On and after 6 years from the date the program is implemented, the bill would prohibit expenditures for the purpose of paying operative costs and administering the trust from exceeding 1% of the total program fund. The bill would revise the purposes for which administrative and program funds may be expended. end insert 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. begin delete The end delete

begin insert The end insert 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 begin delete accounts. end delete begin insert accounts and would eliminate the requirement to secure private underwriting and reinsurance, as specified. end insert 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. begin insert The bill would provide that employers retain the right at all times to set up and offer their own qualified retirement plans. end insert The bill would define begin insert an employer of end insert 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 begin delete covered by a valid collective bargaining
agreement that expressly provides for a multiemployer end delete begin insert on whose
behalf an employer makes contributions to a end insert Taft-Hartley pension

begin delete plan. end delete begin insert trust fund. end insert

(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.

begin insert

(3) “Eligible employer” does not include an employer that
provides a retirement savings program as described in subdivision
(g) of Section 100032.

end insert

(e) “IRA” means an individual retirement account or individual
retirement annuity under Section begin delete 408(a) or 408(b) end delete begin insert 408(a), 408(b),
or 408A end insert of Title 26 of the United States Code.

begin insert

(f) “myRA” means the federal myRA retirement savings
program, including any successor program, offered by the United
States Department of the Treasury or an IRA offered under that
program.

end insert begin delete

(f)

end delete

begin insert (g) end insert  “Participating employer” means an eligible employer that
provides a payroll deposit retirement savings arrangement provided
for by this title for eligible employees.

begin delete

(g)

end delete

begin insert (h) end insert  “Payroll deposit retirement savings arrangement” means an
arrangement by which an employer allows employees to remit
payroll deduction contributions to a retirement savings begin delete program. end delete

begin insert program, which may include an IRA, and in the case of a payroll
deduction IRA arrangement, to remit specifically to an IRA. end insert

begin delete

(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.

end delete

(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 begin delete deposit end delete begin insert deduction end insert 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.

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.

begin delete

(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.

end delete begin insert

(e) The board, subject to its authority and fiduciary duty, shall
design and implement the California Secure Choice Retirement
Savings Program.

end insert begin insert

(1) (A) For up to three years following the initial
implementation of the program, the board shall establish managed
accounts invested in United States Treasuries, myRAs, or similar
investments.

end insert begin insert

(B) The board shall have the authority to provide for investment
in myRAs, provided that, in accordance with the myRA provisions,
myRA contributions and investment returns shall only be used for
myRA investments and to make distributions to, or for the benefit
of, participants and shall not be used to pay any costs of
administration.

end insert begin insert

(2) (A) During period described in paragraph (1), the board
shall develop and implement an investment policy that defines the
program’s investment objectives and shall establish policies and
procedures enabling investment objectives to be met in a prudent
manner. The board shall seek to minimize participant fees and
strive to implement program features that provide maximum
possible income replacement balanced with appropriate risk in
an IRA-based environment. The policy shall describe the investment
options available to holders of individual savings accounts
established as part of the program. Investment options may
encompass a range of risk and return opportunities and allow for
a rate of return commensurate with an appropriate level of risk
to meet the investment objectives stated in the policy.

end insert begin insert

(B) The board may also develop investment option
recommendations that address risk-sharing and smoothing of
market losses and gains. Investment option recommendations may
include, but are not limited to, the creation of a reserve fund or
the establishment of customized investment products.
Implementation of an investment option recommendation pursuant
to this subparagraph shall be contingent upon subsequent approval
by the Legislature.

end insert begin insert

(3) After the period described in paragraph (1) has expired, 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.

end insert begin delete

(3)

end delete

begin insert (4) end insert  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. begin delete The investment manager shall report the following
information to the board within 20 days following the end of the
each month: end delete

begin delete

(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.

end delete

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 begin delete system
or end delete begin insert system, with end insert private money managers, or begin delete both, end delete begin insert in myRAs, or a
combination thereof, end insert 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 begin delete title. end delete
begin insert title, including, but not limited to, board operations, program
administrator and investment expenses, and enforcement and
compliance costs. end insert On begin insert and after six years from the date the program
is implemented, on end insert 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. begin delete Operating costs associated
with administering the trust do not include the procurement of
private underwriting for the retirement savings’ return. end delete

(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. 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 begin delete deposit end delete begin insert deduction end insert IRA arrangements.

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) Contract with a program administrator and determine the
duties of the program 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. begin delete 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 delete

(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 begin delete trust, and secure private
underwriting and reinsurance to manage risk and insure the
retirement savings rate of return. end delete begin insert trust. end insert

(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, begin insert licensed end insert
insurance begin insert agents end insert and financial advisors in assisting and providing
guidance for begin delete eligible employers and end delete 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. 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 begin delete the end delete tax credits available
to small business owners for begin delete establishing new retirement plans end delete
begin insert allowing their employees to participate in the program, end insert 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 begin delete individual retirement accounts end delete
begin insert IRAs end insert on their employees’ behalf.

(k) Allow participating employers to make their own
contributions to their employees’ begin delete individual retirement accounts, end delete
begin insert IRAs, end insert 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. 7.  

Section 100013 of the Government Code is repealed.

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 begin delete packet. end delete
begin insert packet that shall be available in an electronic format. end insert 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 begin delete are not in a position to end delete begin insert do not end insert provide
financial advice, begin insert that employees are not to contact their employers
for financial advice, end insert and that employers are not liable for decisions
employees make pursuant to Section 100034.

begin delete

(2) The program is not an employer-sponsored retirement plan.

end delete begin insert

(2) This retirement program is not sponsored by the employer,
and therefore the employer is not responsible for the plan or liable
as a plan sponsor.

end insert

(3) The program fund is not guaranteed by the State of
California.

(d) The disclosure form shall include a begin delete signature line end delete begin insert method end insert
for the employee to begin delete sign and date acknowledging end delete begin insert acknowledge end insert
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 begin insert with the disclosure and
opt-out forms end insert 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 begin delete read it by signing
the signature line accompanied by the date of the signature. end delete

begin insert received it. end insert

(g) The employee information packet begin insert with the disclosure and
opt-out forms end insert shall be supplied to existing employees when the
program is initially launched for that participating employer
pursuant to Section begin delete 100032 and employees shall review and sign
the disclosure form at that time. end delete begin insert 100032. end insert

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 begin delete an employer-sponsored retirement
plan or automatic enrollment payroll deduction IRA end delete begin insert a retirement
savings program pursuant to subdivision (g) end insert 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 begin delete an employer-sponsored retirement
plan or automatic enrollment payroll deduction IRA end delete begin insert a retirement
savings program pursuant to subdivision (g) end insert 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 begin delete an
employer-sponsored retirement plan or automatic enrollment
payroll deduction IRA end delete begin insert a retirement savings program pursuant to
subdivision (g) end insert 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, begin delete participating
employers end delete begin insert the board end insert shall designate an open enrollment period
during which eligible employees that previously opted out of the
program shall be begin delete enrolled in the program unless the employee
again elects to opt out as provided in this subdivision. end delete begin insert given the
employee information packet with the disclosure and opt-out forms,
for the employee to enroll in the program or opt out of the program
by making a notation on the opt-out form. end insert

(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 begin delete employer’s end delete begin insert board’s end insert designated open enrollment period or if
permitted begin delete by the employer end delete at an earlier time.

(g)  begin delete Employers shall retain the option at all times to set up any
type of end delete begin insert (1) end insert begin insert   end insert begin insert An employer that provides an end insert 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 begin delete to offer end delete begin insert that offers end insert
an automatic enrollment payroll deduction begin delete IRA, instead of having
a payroll deposit retirement savings arrangement to allow employee
participation in the California Secure Choice Retirement Savings
Program. end delete begin insert IRA, shall be exempt from the requirements of the
California Secure Choice Retirement Savings Program, if the plan
or IRA qualifies for favorable federal income tax treatment under
the federal Internal Revenue Code. end insert

begin insert

(2) An employer shall retain the option at all times to set up
and offer a qualified retirement plan instead of having a payroll
deposit retirement savings arrangement to allow employee
participation in the California Secure Choice Retirement Savings
Program.

end insert

(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. begin insert The program is a state-administered
program, not an employer-sponsored program. If the program is
subsequently found to be preempted by any federal law or
regulation, employers shall not be liable as plan sponsors. end insert 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 begin delete (j) end delete
begin insert (k) end insert 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. 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. 12.  

Section 100040 of the Government Code is repealed.

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 begin delete an end delete begin insert a third-party administrator end insert
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. 15.  

Section 100043.5 of the Government Code is
repealed.

SEC. 16.  

Section 100046 is added to the Government Code,
to read:

100046.  

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

begin delete

(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)

end delete

begin insert (b) end insert  The board shall include 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.

begin delete

(6)

end delete

begin insert (c) end insert  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.

begin delete

(7)

end delete

begin insert (d) end insert  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.

begin delete

(8)

end delete

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

begin delete

(9)

end delete

begin insert (f) end insert  The board shall include comprehensive worker education
and 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.

begin delete

(10)

end delete

begin insert (g) end insert  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:

begin delete

(A)

end delete

begin insert (1) end insert  A program begin insert Internet end insert Web site to assist the employers of
participating employees.

begin delete

(B)

end delete

begin insert (2) end insert  A toll-free help line for employers with live and automated
assistance.

begin delete

(C)

end delete

begin insert (3) end insert  Online begin insert Internet end insert Web training.

begin delete

(D)

end delete

begin insert (4) end insert  Live presentations to business associations.

begin delete

(E)

end delete

begin insert (5) end insert  Targeted outreach to small businesses with 10 or less
employees.

begin delete

(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 delete

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. 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 begin delete qualified under Section 408(a) or 408(b) of the United States
Code end delete for the purpose of determining eligibility or benefit level for
a program that uses a means test.

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 begin delete assure end delete begin insert ensure end insert the performance of all
rights, begin delete duties end delete begin insert duties, end insert 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 begin delete deposit end delete begin insert deduction end insert 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 begin delete old-age survivors end delete begin insert old-age,
survivors, end insert 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 begin delete assure end delete begin insert ensure end insert 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, begin delete survivors end delete begin insert survivors, end insert 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 begin delete old-age
survivors end delete begin insert old-age, survivors, end insert 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, begin delete survivors end delete begin insert survivors, end insert
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.