Posted: April 11, 2008
Editor’s note: This is excerpted from a story by John Hill and Mark Glover that appeared in the April 10 Sacramento Bee.
A proposal to open California’s retirement system to
private sector workers prompted questions Wednesday (April 9) about government
competing with investment firms and the pension system’s ability to handle the
unique program.
“We just don’t know if it’s going to work yet,”
Assemblyman Kevin Jeffries, R-Lake Elsinore, said of the proposal to have the
California Public Employees’ Retirement System offer IRA accounts to workers
whose employers don’t offer retirement savings plans.
But Sacramento carpenter Lou Delgado said he would be
interested in a CalPERS retirement account.
“I’m 40 years old and don’t have anything in a real
retirement plan, just some savings of my own,” Delgado said. “I’ve worked for a
lot of (companies) and never had something like that, so, yeah, I’d be
interested in anything that could put away a few dollars a week at this stage
of my life.”
The proposal, Assembly Bill 2940 by Assemblyman Kevin De
León, D-Los Angeles, passed its first test Wednesday when a committee that
deals with retirement issues approved it on a 4-1 vote, with Jeffries
abstaining and another Republican, Joel Anderson of Alpine, voting against it.
Supporters said the idea has been percolating for years,
both on the federal level and in statehouses. It’s being pushed by think tanks
as a way to get low- and middle-income Americans to start saving for retirement
to supplement Social Security payouts.
“We’re trying to create a new model to get people on
board,” said Mark Paul, senior scholar at the New America Foundation, a
nonprofit, nonpartisan institute that is sponsoring AB 2940.
As it is, about 6 million Californians work for
businesses that do not offer retirement savings plans such as 401(k)s. Gov.
Arnold Schwarzenegger said Tuesday that he likes the idea.
The bill calls on the California Public Employees’
Retirement System to offer IRA accounts to workers whose employers don’t. The
accounts would benefit from CalPERS’ investment acumen, but would be separate
from the traditional pensions offered to public employees.
The retirement system has not yet taken a position on the bill, and its board is not expected to consider it until its May meeting, at the earliest.
The bill
envisions the Employment Development Department using its existing automated
system for collecting payroll taxes to allow workers to have contributions
deducted from their paychecks.
CalPERS is
renowned for its investing prowess, supporters say, and could use a contractor
to service the accounts, such as mailing statements and maintaining a Web site.
If the retirement system tapped into a large market, the big pool of investors
would create economies of scale.
The state of
Washington, however, is moving ahead with a plan to offer retirement savings
accounts through its public employee retirement system. Washington lawmakers
are expected to consider the proposal in 2009.