Secure Choice: California's Opportunity for Retirement Readiness.

• Author: Wright, Leonard C.
• Position: Financial planning

to help workers boost savings and be ready for when retirement comes, California has formed Secure Choice, which creates a state-run retirement program for workers who don't have an employer-sponsored plan.

Though signed into law by Gov. Brown in 2016 via SB 1234, the mandate will not go into effect until 2019, at the earliest, as regulations are being developed.

When it does kick in, large employers that do not offer a retirement plan to their employees will be required to provide access to Secure Choice.

While the state-run program may be controversial to some in the private sector, no one can dispute the importance of achieving some measure of financial security in the lives of Californians.

And there are some positive metrics that support the efforts of California and 40 other states that are in the process of providing sueh programs. For example, those who save in an employer plan generally continue to save, and those who are automatically enrolled in retirement savings plans participate at a significantly greater rate, perhaps as high as 90 percent to 95 percent.

The evidence shows significantly better retirement readiness when automatic enrollment is utilized in retirement plans.

What is Secure Choice?

Secure Choice is an IRA savings program designed on an opt-out payroll deduction basis for employees, meaning employees will automatically be enrolled unless they opt out.

Under SB 1234, employers with five or more employees that don't already provide a retirement plan will be required to either begin to offer a retirement plan or provide their employees access to Secure Choice, according to the following timeline:

* Employers with more than 100 employees will need to offer a retirement plan within 12 months;

* Employers with more than 50 employees will need to offer a retirement plan within 24 months; and

* Employers with more than fixe employees will need to offer a retirement plan within 36 months.

For employees who do not opt-out of participation, the employer will be required to withhold a minimum amount of compensation and placed in lower-risk investments. The withholding amount is based on a percentage of the employee's payroll, with the minimum amount being set at 3 percent. Employees can choose to contribute a higher percentage.

Who's Responsible?

A nine-member board, chaired by California State Treasurer John Chiang, governs Secure Choice. The board employs an executive director appointed by the treasurer and other staff and...