SACRAMENTO >> A state program to help millions of Californians save for retirement could hit a roadblock this week if the U.S. House of Representatives votes to keep states from setting up individual plans for those who don’t have access to 401(k)-type benefits through their jobs.
With the GOP controlling the White House and Congress, some Republicans in the House are trying to scuttle systems established by California and at least four other states — Oregon, Maryland, Illinois and Connecticut — that automatically enroll workers without retirement benefits in payroll deduction plans.
Behind the move is the U.S. Chamber of Commerce, which has argued that state plans will lead more employers to drop their more robust 401(k) benefits, which are more costly and cumbersome for businesses to manage. An erosion of private-sector retirement plans, they say, will only hurt workers.
But the rush to kill state programs years in the making faces fierce opposition from the AARP, small business associations and labor unions. With research showing some 40 million American households have no money in retirement accounts, they say, Congress should be addressing the crisis, not undermining states’ attempts to fill the void.
“Americans need easy savings options. No one wants older Americans solely dependent on Social Security,” said Nancy A. LeaMond, executive vice-president for the AARP, in a letter to Congress, which on Wednesday is scheduled to vote on two related resolutions, 66 and 67, to repeal rules set by the Department of Labor under the Obama administration.
For the rule change to take effect, the U.S. Senate would also need to repeal it. President Trump had yet to publicly weigh in on the issue as of Monday afternoon.
California is just beginning to roll out its program, Secure Choice, which became law last year after years of study. Secure Choice would automatically enroll workers without retirement benefits in an automatic payroll deduction plan managed by a third-party company and overseen by a board led by the state treasurer. Workers could opt out, and the default contribution would start at roughly 3 percent. The only responsibility of employers under the program is to give their workers the enrollment paperwork. A state feasibility study estimated that roughly 7 million workers could benefit.
Surveys have shown broad support for such programs from small business owners, Democrats and Republicans. Two-thirds of California business owners surveyed last year by the Small Business Majority, a national trade association, last year were in favor of the plan. And 72 percent of Republicans and 83 percent of Democrats polled in a national survey this year by the National Institute on Retirement Security said they supported such programs.
Katy Murphy is a Bay Area News Group reporter
