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.