SACRAMENTO (AP) — The state Senate on Wednesday passed a bill that would create a guaranteed, government-run retirement savings program catering to private-sector workers of modest means.
Lawmakers passed SB1234 by Sen. Kevin de Leon, D-Los Angeles, and Senate President Pro Tem Darrell Steinberg, D-Sacramento, on a 23-13 vote. It now moves to the Assembly.
Unlike an IRA, de Leon said his legislation would create a "defined benefit retirement" plan with a guaranteed rate of return. He described the California Secure Choice Retirement Savings Act as a supplement to Social Security for nearly 7 million Californians without access to a workplace retirement plan.
Republican lawmakers opposed the measure, noting that workers already can establish low-cost private retirement accounts, such as IRAs. They say Democrats don't want to upset their union allies by tackling public pension reform as proposed by Democratic Gov. Jerry Brown.
"This bill essentially is trying to create a retirement program for private-sector employees at a time when the state's own retirement system is going bankrupt," said Sen. Sam Blakeslee, R-San Luis Obispo.
Blakeslee said virtually anyone can set up no-load retirement accounts without the state's involvement.
Supporters say it would serve as an affordable retirement program for private-sector workers who make less than $50,000 a year. That segment has largely been ignored by Wall Street and private financial firms, de Leon said.
"We have an opportunity to pull together this very fragmented population, pool their resources together and hopefully we can compound with a solid interest over the course of many horizons and have something for them left during their retirement," de Leon said before the vote.