California offers to run pensions for small employers

First state-run pension program for nongovernment workers targets firms that don't offer 401(k)s

Oct 2, 2012 @ 8:42 am

California Governor Jerry Brown signed a law that permits as many as 6.3 million private workers without a pension plan to set aside retirement money for management by the state.

It is the first state-run pension program for nongovernment employees and may add as much as $6.6 billion to funds managed by the California Public Employees' Retirement System, the biggest U.S. pension. Calpers, as the fund is known, has assets of $242 billion.

The law is aimed at businesses with five or more employees that don't offer pensions or 401(k) savings programs. The law requires companies to contribute 3 percent of a worker's salary to a retirement account. Workers will be enrolled in the program unless they choose to opt out.

About 6.3 million Californians, most of them making less than $46,420 a year, aren't covered by an employer-provided retirement plan, according to a June 2012 study by the Labor Center of the University of California, Berkeley.

The measure was opposed by the California Chamber of Commerce and Republican lawmakers.

The law won't automatically entrust the new retirement accounts to Calpers. Rather, the fund, which manages benefits for 1.6 million public employees, retirees and beneficiaries, will bid for the asset-management business in a process to be overseen by an investment board headed by the state treasurer. Private firms may compete to manage all or part of the money.

(Bloomberg News)

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

The biggest drivers in wealth management today

What's shaping the future of financial advice? After 10 years of MarketCounsel Summits, Brian Hamburger explains what's changed in the past decade and what stands ahead for adviser technology and regulation.

Video Spotlight

Help Clients Be Prepared, Not Surprised

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

RIAs struggle to keep clients grounded amid stock market euphoria

With equities at record levels, financial advisers are confronted with realities of greed and fear.

Regulators showing renewed interest in cracking down on investment fees

SEC, Finra targeting high-fee share classes, 12b-1 fees and failure to give sales load discounts and waivers to investors.

Tax update: Brady says sales tax deduction in final bill

Taxpayers will be able to deduct state income taxes or state sales taxes in addition to property levies — up to a $10,000 cap.

Complexity of new indexed annuities causing concern

Insurers are using 'hybrid' indices as a way to differentiate themselves, but critics contend the products are less transparent, more confusing and don't add financial benefit.

Critics say regulation hasn't curbed overly rosy projections for indexed universal life insurance

They say rule didn't go far enough and more stringent measures may be necessary.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print