SB 1234: legislation to help Californians save for retirement.

• Author: Fox, Jason
• Position: Capitol Beat

Workers do have the option to adjust the amount contributed or opt out.

One day before the deadline to sign or veto bills, Gov. Brown signed SB 1234 into law, which will create new retirement savings accounts for California employees who don't have one through their employment. SB 1231, authored by Sen. Kevin de Leon, will require employers with at least five employees to enroll their workers in the new California Secure Choice Retirements Savings program if they do not already provide their own retirement program to employees.

The California Secure Choice Retirement Savings Investment Board will oversee the program. The board that was created through the passage of legislation in 2012; however, a majority of the administrative work will be outsourced to private companies in California.

The plan will operate similarly to most common 401 (k) plan.

Under SB 1234, workers who do not have access to an employer-sponsored retirement plan will automatically contribute 3 percent of wages to the California Secure Choice Retirement Savings Trust. The plan will focus on long-term financial growth through investments in a diversified portfolio. Workers do have the option to adjust the amount contributed or opt out.

The retirement account would move with workers if they change jobs. There also would be a fine imposed if money is withdrawn from the account before retirement, similar to other 401(k) retirement plans on the market.

The sponsors of SB 1234 are seeking to provide retirement options for low-income Californians who may not have access to employer-sponsored retirement plans.

Under the new plan, nearly all private workers will have access to retirement plans when employee contributions begin in 2018. However, many are concerned that many low-income workers may not be receptive to a reduction in their net paycheck.

Others are less confident that a state managed 401 (k) will be able to weather economic downturns or be free from future manipulations from the state to pursue riskier investments.

As the new program begins, many small-business clients will be looking to their CPA for assistance in making sure they meet the requirements as employers, particularly if they have any employees electing to participate in the new program.

You can look up the full text of die bill at http://leginfo.legislature.ca.gov.

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