Lawmakers Back Retirement Plan for California Workers

California may soon offer a retirement savings plan to the nearly 7 million private sector workers who don't already get one through their job.

The state Assembly on Thursday approved Senate Bill 1234, marking a huge victory for Senate President Pro Tem Kevin de León. The Los Angeles Democrat has worked for years on the issue, authoring legislation in 2012 that paved the way for what he calls the Secure Choice savings program.

Under the bill -- which needs one more procedural vote in the Senate before heading to Gov. Jerry Brown's desk -- workers at companies with five or more employees would automatically be enrolled in a state-run individual retirement account. Employees would contribute 3 percent of their earnings -- they could opt out -- into an individual retirement account, or IRA, that would be managed by a state board.

"It's a long time coming -- now, close to 7 million workers in the private sector who have no access to any kind of retirement security will now have access," de León said. "And we are not just talking about people at the lowest economic strata. We are talking about many middle-income workers, but especially women."

Workers who haven't been offered a retirement savings option through their employers can currently open their own IRA, but many don't. Supporters hope the system created by SB 1234 would be more attractive for its automatic nature, and that it will make the process cheaper for workers because the state can leverage its buying power to negotiate lower fees.

The 2012 legislation created a process to study the feasibility of de León's proposal and ensure it would not put state taxpayers at risk. In March, the board created to answer those questions gave the proposal its green light, and Thursday morning -- just hours before the Assembly vote -- the Obama administration gave a final thumbs-up to the plan.

De León said the issue should have been taken up by Congress, but lawmakers in Washington, D.C., have refused to act.

"Obviously, the retirement tsunami is not just a California dilemma, a crisis, but it's a national crisis, because you have tens of millions of Americans who are retiring into poverty," he said.

"And the fact that Washington, D.C. -- specifically the Congress -- has refused to engage on this issue, we decided that we will act ourselves in California, and we will do everything possible to provide retirement security, a modicum of dignity and respect."