State-Run Retirement Program Is Viable, Report Says

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By Laura Mahoney

Feb. 5 — At least 70 percent of the 6.8 million Californians eligible for a state-sponsored private sector retirement savings program are willing to participate and contribute enough to make the program viable, according to a market analysis of the potential for the program.

The analysis recommended that the California Secure Choice Retirement Savings Investment Board, and ultimately the state legislature, move forward with the program with default contribution rates of 5 percent from employees and a default investment vehicle geared toward long-term growth.

Secure Choice should expand its investment choices and automatically increase employee contributions by 1 percent a year to reach 10 percent of salary within a few years of its launch, the Jan. 31 report said. The Secure Choice board released the report publicly Feb. 2.

“The Secure Choice Program is financially viable and self-sustaining even under adverse conditions with poor investment returns and high opt-out rates,” according to the analysis, prepared by Overture Financial LLC for the Secure Choice board.

Hearings, Recommendations

The analysis is a required step under the 2012 law calling for California to consider launching the first-in-the-nation retirement program for private sector workers. The nine-member Secure Choice board is soliciting public comment on the analysis, and will hold public hearings March 1 in Los Angeles and March 3 in Oakland.

The board will weigh the report's recommendations and public comments at a March 28 meeting, when it will adopt its final report to the legislature outlining the next steps required to launch the program, California Deputy Treasurer Grant Boyken told Bloomberg BNA Feb. 5.

If the legislature moves ahead with the program, private employers with five or more employees that don't offer a retirement savings plan would be required to give their employees access to Secure Choice through payroll deductions. The Secure Choice board, chaired by the state treasurer, would oversee the program.

With the federal Department of Labor tackling the legal issue of Employee Retirement Income Security Act exemption for state-run private retirement investment programs through proposed regulations, the Overture report doesn't make recommendations related to ERISA. The analysis mentions several smaller legal issues the board must tackle if the program moves forward, including securing a determination from the Securities and Exchange Commission that the investment vehicles are IRAs and not new securities that must be registered, Boyken said.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at

To contact the editor responsible for this story: Jo-el J. Meyer at