After a decade of effort, California enacted a bipartisan program offering millions of working people a shot at more retirement security last year.
California Secure Choice created a state-managed individual retirement account program for workers whose employers don’t offer pensions or 401(k) plans. Sound mundane, but 6.8 million Californians – workers at car washes, dry cleaners, restaurants, etc. – simply don’t have access to retirement plans that people in the corporate and public sectors take for granted.
It’s an ominous gap. More than 55 million workers nationally lack workplace retirement plans, and many face old age utterly dependent on a Social Security check.
California, with help from the U.S. Department of Labor, developed a modest but effective solution – allowing the working poor to save even small amounts in IRAs. The plan simultaneously satisfied businesses and taxpayer advocates – no small feat.
Studies have shown that workers are far more likely to save if they can do it through an automatic deductions. Small businesses automatically put a portion of a worker’s wages into a low-cost fund – either one they offer or the state fund. Because Congress was incapable of developing a program for workers nationwide, the Obama administration approved waivers last year to allow states to fill the gaps. California is one of two dozen states offering or considering state-facilitated retirement programs.
The limit of the employers’ involvement is helping employees sign up or opt out. There should be no cost to employers or taxpayers. Private firms manage the state fund, overseen by a state board.
Initially, business groups and fiscal hawks resisted, but as the measure evolved they dropped their opposition. By the time Secure Choice was signed by Gov. Jerry Brown, its sole opponent was a mutual fund lobby worried about competition in a market it doesn’t serve.
Now House Republicans, in a rush to please Wall Street, are trying to kill this program. The move is reprehensible, misinformed and disingenuous. The House Committee on Education and the Workforce has decided to shred all those state waivers, arguing workers must be “protected” from plans that don’t involve the private sector.
Instead, the Republican who control Congress want to forced poor workers to give their savings to Wall Street bankers – the same people largely responsible for the 2008 financial collapse.
Commercial bankers and the U.S. Chamber of Commerce claim California’s rules leave the savings vulnerable to mismanagement; that businesses will dump existing plans if the state provides an option; that taxpayers might have to cover fund losses. But their arguments are entirely self-serving. California’s consumer protections are strict; employers with private plans have no reason to drop them, and the state’s program explicitly bans any taxpayer bailout.
But this Congress never lets facts get in the way of dogma – or a powerful lobby with a fat checkbook. Resolutions to kill the Obama waivers will come to the House floor today, and are expected to pass under an arcane law that lets Congress nullify any federal regulation finalized since June – without a public hearing. Even if the Senate passes the same bill, and Trump signs them into law, California would have to challenge Congress in court to proceed.
Among those who support California’s program is state Sen. Anthony Cannella of Ceres, a Republican and small-business owner. We can only hope that Rep. Jeff Denham aligns himself with Cannella and the working poor of California – not dogmatic Republicans and Wall Street bankers.