BILL NUMBER: SB 1234 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 31, 2016
PASSED THE ASSEMBLY AUGUST 25, 2016
AMENDED IN ASSEMBLY AUGUST 18, 2016
AMENDED IN ASSEMBLY AUGUST 15, 2016
AMENDED IN ASSEMBLY JUNE 15, 2016
AMENDED IN SENATE MAY 31, 2016
AMENDED IN SENATE APRIL 5, 2016
INTRODUCED BY Senator De León
(Principal coauthor: Assembly Member Gatto)
(Coauthors: Senators Beall, Hall, Hertzberg, Leno, and Pan)
(Coauthors: Assembly Members Dodd, Cristina Garcia, Gonzalez,
McCarty, and Williams)
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, 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 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. 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. 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. 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 and would eliminate
the requirement to secure private underwriting and reinsurance, as
specified. 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.
The bill would eliminate the authority of the board to establish
certain investment options.
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
provide that employers retain the right at all times to set up and
offer their own qualified retirement plans. The bill would define an
employer of a provider of in-home supportive services as an employer
if a specified determination and certification are 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.
Appropriation: yes.
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 on whose behalf an employer makes contributions
to a Taft-Hartley pension trust fund.
(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 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.
(3) "Eligible employer" does not include an employer that provides
a retirement savings program as described in subdivision (g) of
Section 100032.
(e) "IRA" means an individual retirement account or individual
retirement annuity under Section 408(a), 408(b), or 408A of Title 26
of the United States Code.
(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.
(g) "Participating employer" means an eligible employer that
provides a payroll deposit retirement savings arrangement provided
for by this title for eligible employees.
(h) "Payroll deposit retirement savings arrangement" means an
arrangement by which an employer allows employees to remit payroll
deduction contributions to a retirement savings program, which may
include an IRA, and in the case of a payroll deduction IRA
arrangement, to remit specifically to an IRA.
(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 deduction 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.
(e) The board, subject to its authority and fiduciary duty, shall
design and implement the California Secure Choice Retirement Savings
Program.
(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.
(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.
(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.
(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.
(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.
(4) 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.
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, with private
money managers, or in myRAs, or a combination thereof, 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, including, but not limited to, board operations, program
administrator and investment expenses, and enforcement and compliance
costs. On and after six years from the date the program is
implemented, 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.
(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
deduction 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.
(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.
(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, licensed
insurance agents and financial advisors in assisting and providing
guidance for 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) 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.
(d) Disseminate information concerning tax credits available to
small business owners for allowing their employees to participate in
the program, and the federal Retirement Savings Contribution Credit
(Saver's Credit) available to lower and moderate-income households
for qualified savings contributions.
(e) Submit progress and status reports to participating employers
and eligible employees.
(f) If necessary, determine the eligibility of an employer,
employee, or other individual to participate in the program.
(g) 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.
(h) Design and establish the process for the enrollment of program
participants.
(i) Allow participating employers to use the program to remit
employees' contributions to their IRAs on their employees' behalf.
(j) Allow participating employers to make their own contributions
to their employees' IRAs, provided that the contributions would be
permitted under the Internal Revenue Code and would not cause the
program to be treated as an employee benefit plan under the federal
Employee Retirement Income Security Act.
(k) 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 packet that shall be
available in an electronic format. 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 do not provide financial advice, that
employees are not to contact their employers for financial advice,
and that employers are not liable for decisions employees make
pursuant to Section 100034.
(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.
(3) The program fund is not guaranteed by the State of California.
(d) The disclosure form shall include a method for the employee to
acknowledge 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 with the disclosure and
opt-out forms 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 received it.
(g) The employee information packet with the disclosure and
opt-out forms shall be supplied to existing employees when the
program is initially launched for that participating employer
pursuant to Section 100032.
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 a retirement savings program pursuant to
subdivision (g) 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 a retirement savings program pursuant to
subdivision (g) 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 a
retirement savings program pursuant to subdivision (g) 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, the board shall
designate an open enrollment period during which eligible employees
that previously opted out of the program shall be 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.
(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
board's designated open enrollment period or if permitted at an
earlier time.
(g) (1) An employer that provides an 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 that offers an automatic enrollment
payroll deduction 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.
(2) An employer shall retain the option at all times to set up and
offer a tax-qualified retirement plan, as described in paragraph
(1), 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. 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. 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. 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
subparagraph (A) and any associated guidance.
(E) The board has adopted a third-party administrator 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. The California Secure Choice Retirement Savings Program
is approved by the Legislature and implemented as of January 1, 2017.
The board shall consider and utilize the following parameters in
designing the program:
(a) 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, and the Director of the
State Department of Social Services and the Director of the
Department of Finance certify, in writing, all of the following:
(1) The inclusion meets all state and federal legal requirements.
(2) The appropriate employer of record has been identified for the
purpose of satisfying all the program's employer requirements.
(3) The payroll deduction, described in Section 12302.2 of the
Welfare and Institutions Code, can be implemented at reasonable
costs.
(4) The inclusion does not create a financial liability for the
state or employer of record.
(b) 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.
(c) 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.
(d) The board shall consult with employer representatives to
create an administrative structure that facilitates employee
participation while addressing employer needs, including, but not
limited to, clearly defining employers' duties and liability
exemption pursuant to Section 100034.
(e) 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.
(f) 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:
(1) A program Internet Web site to assist the employers of
participating employees.
(2) A toll-free help line for employers with live and automated
assistance.
(3) Online Internet Web training.
(4) Live presentations to business associations.
(5) Targeted outreach to small businesses with 10 or less
employees.
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 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 ensure 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 deduction 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 ensure 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.