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California Secure Choice: Market Analysis, Feasibility Study, and Program Design Consultant Services

report published by Overture Financial, LLC

RELATED BLOG POST: An Important Step Toward Solving California’s Retirement Crisis

  • Summary

    Final report for the Market Analysis, Financial Feasibility, and Program Design study for the California Secure Choice Retirement Savings Plan as required by SB 1234. Under SB 1234, California employers with five or more employees that do not offer a pension, 401(k), or similar retirement plan will be required to auto-enroll their employees into a state-sponsored IRA. Employees may individually choose to opt out. The program is intended to increase retirement savings among low- and middle-wage workers, and to offer them access to a high-quality, low-cost investment vehicle. A feasibility study and additional legislative authorization are required to implement the program.

    Report Contributors: Overture Financial (consultant team lead), UC Berkeley Labor Center (lead, market analysis), Matthew Greenwald & Associates, Segal Consulting, Bridgepoint Consulting, Rowland Davis, and Arun Muralidhar.

    Key findings

    • About 6.8 million workers are potentially eligible for the California Secure Choice Retirement Savings Program.
    • Likely participation rates (70-90%) are sufficiently high to enable the Program to achieve broad coverage, and are well above the minimum threshold for financial sustainability.
    • Eligible participants are equally comfortable with a 3% or 5% contribution rate. The vast majority of likely participants are also comfortable with auto-escalation in 1% increments up to 10%.
    • The Program will be financially viable and self-sustaining even under adverse conditions with poor investment returns and high opt-out rates
    • Total fees to participants need not exceed 1% of invested assets and such fees can decline to significantly lower levels after the first 5 years of operation, making the Program very attractive for savers.

    Key recommendations

    • Default contribution rate: 5%, with auto-escalation up to 10%
    • Default investment vehicle: 1) A Target Date/Lifecycle style investment product that automatically shifts from stocks to bonds as a participant nears retirement, or 2) a Pooled IRA with Reserve Fund—a specially designed investment vehicle with collective risk sharing among employees—packaged as a Retirement Savings Bond.


  • New state retirement law could help childcare workers save
    89.3 KPCC Southern California Public Radio | October 3, 2016

    California proposal for state-run retirement plan for private-sector workers moves forward
    Los Angeles Times | March 28, 2016

    California board recommends Secure Choice legislation
    Pensions & Investments | March 28, 2016

    State-managed retirement plan for California workers takes shape
    Sacramento Bee | March 27, 2016

    New retirement plan will provide financial security to millennials
    Sacramento Bee | March 25, 2016

    Retirement Board Facing Critical Pension Decision
    Capital & Main | March 25, 2016

    California Secure Choice report recommends target-date funds or pooled IRAs
    Pensions & Investments | February 5, 2016

    California unveils blueprint for payroll-deduction IRA
    San Francisco Chronicle | February 3, 2016