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Center for Labor Research and Education


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Private-sector workers deserve a secure pension program, too

Mercury News

California’s pension system underwent a massive overhaul this summer with substantial rollbacks to public employee retirement benefits and strong safeguards against abuses that have unfairly tarnished the reputation of those working in the public sector.

A recent Mercury News investigation was a big reality check for the widespread but wrongheaded notion that union workers walk away with gigantic taxpayer-subsidized pensions. It’s not the workers who fix our potholes or answer our 911 calls who comprise the $200,000-a-year-pension club, according to the article; it’s “the nonunion bosses.” In fact, the average monthly pension in the California Public Employees’ Retirement System today is $2,332 a month, or $27,984 a year. For those who retired in 2010-2011, it is $3,065 a month.

Yet the myth of retirement boondoggles for the typical public worker persists.

One reason is that private-sector workers are — understandably — increasingly insecure about their own retirement. Nearly half of California workers are at serious risk of falling into poverty or near-poverty when they can no longer work, and 6 million workers in the private sector have no access to workplace retirement savings plan. Most of those 6 million work in small businesses with fewer than 100 employees.

While California made national headlines with pension reform, there is another closely watched bill working its way through Sacramento that would make the state a national leader again — this time by bringing a measure of retirement security to the millions who work in the private sector. Authored by Sens. Kevin DeLeon and Darrell Steinberg, the California Secure Choice Retirement Savings Trust Act takes a bold step toward acquainting private-sector workers with the idea of setting aside a portion of their paycheck for retirement.

SB 1234 has cleared both houses of the Legislature and awaits Gov. Jerry Brown’s signature. The bill sets up a badly needed retirement savings program for private-sector workers who aren’t covered by any workplace plan. It calls for a private insurer to back the fund, so the state would assume no risk of liability for future payments. Administrative costs would be paid from earnings on investments.

SB 1234 would give millions of California workers the choice to save and invest in a secure, low-cost retirement fund. Workers would contribute through automatic enrollment and payroll deduction through their jobs, at no cost to taxpayers or the employer. The plan would be fully portable from job to job. Large-scale pooling would help keep fees low.

This legislation will create a lifelong retirement savings system, enabling workers to build their assets and achieve financial stability in retirement. If all workers contributed just 3 percent of their earnings toward a retirement fund, an estimated $6.6 billion would be generated in the first year alone.

This legislation is supported by small businesses, AARP, the California Labor Federation, the Congress of California Seniors and other groups representing millions of current and retired workers in the state.

Pension reform may indeed be necessary, but it is time to also address one of the biggest retirement issues facing California and the country: how to provide retirement security for all workers who have put in a lifetime of hard work.

We can no longer ignore America’s retirement crisis, and SB 1234 helps to address the pressing retirement needs of so many of our workers who otherwise live paycheck to paycheck and face an uncertain future heading into their golden years.

Brown signed pension reform into law. To extend access to reasonable and fiscally healthy retirement to workers in the private sector, the governor should sign SB 1234.