The move could make California the first state to require companies to take part in such a system. Colorado was considering the idea but decided against it in May, and New Jersey and Washington have opted instead for programs with very limited state involvement. But Connecticut, Oregon, Maryland and Illinois are moving forward with their own state-run retirement programs and are looking to California as an example.
Currently, California’s plan would require all companies in that state with five or more employees to take part in what is being called the Secure Choice Retirement Savings Program. The biggest companies will start first, and the smallest companies will have three years to get ready.
Money is not expected to start flowing into the first Secure Choice accounts until sometime in 2017.
The companies will not be required to contribute their own money to the program, only to enroll their workers. Nor does the measure make state taxpayers directly liable. But the financial services industry is questioning whether the program will be financially viable — and what will happen if it is not.
The California State Assembly approved the measure on Thursday; next, it must be reconciled with the State Senate’s version, passed in May. Gov. Jerry Brown, a Democrat, will then have 30 days to sign the measure into law. The bill has the support of unions and the AARP, among others.
Important features of the state program still need to be worked out, such as who will manage the money and what investment options will be available to workers.
