(Editor’s Note: The following is a rebuttal to an article entitled “Bill Allows CA Government Seizure Of Private Retirement Plans” written by State Senator Mimi Walters, published on September 21, 2012.)
Senator Mimi Walters’ piece on Senate Bill 1234 is as irresponsibly misleading as its headline is inflammatory and hyperbolic.
In no way does this bill contemplate seizing anything, much less a retirement plan – private or public.
This bill would not, despite Walters’ erroneous assertions, allow the state government to “enter the private pension business under the pretense of ‘sharing the wealth’ of California’s public employee pension systems.” The California Secure Choice Retirement Savings Plan would be a public-private partnership, to be sure. But it would not be part of any public pension system, nor could its assets be used to pay public employee pension benefits. Instead, it would set up an affordable, easily administered retirement plan that private-sector employers could offer to employees who currently have no retirement benefits. It would be funded entirely through employee contributions. It would rely on private-sector insurance, not taxpayer dollars, in the highly unlikely event that its conservative investment objectives are not achieved.
More than seven million California private-sector employees have no access to a retirement plan at work. The majority are lower income workers for small businesses. Lower income individuals and small business with a limited number of employees historically have not been attractive to the financial services firms Walters seems to think are threatened – because their accounts typically do not yield significant profits.
While Walters complains about the minimal government start-up costs of implementing the California Secure Choice Retirement Savings Plan, she totally ignores the potentially massive cost to the state government and California taxpayers if millions of private sector workers age into retirement with insufficient assets. Baby boomers will be flooding the retirement population over the next couple of decades, and millions more workers without retirement benefits are lined up behind them. Social Security will not be enough – and 401(k)s and their brethren are subject to the vagaries of the markets, the range of investment options available in the specific plan and the relative investing acumen of the individual account holder.
Those who retire without sufficient assets won’t be participating in the economy. They are far more likely to rely on public programs and entitlements, draining public coffers and slowing or stalling economic recovery.
Walter’s cynicism about Senate Bill 1234 does not serve the interests of California taxpayers. To the contrary, it endangers the long-term interests of California taxpayers. But it’s a position she can afford to take for the near term, since the full financial impact of ignoring the problem won’t be felt until after the next election or two.
Senate Bill 1234 takes a much longer view – and is aimed at sparing taxpayers the kind of costly retirement security crisis that Walters’ approach all but guarantees.
(Hank Kim, Esq., is the Executive Director and Counsel for the National Conference on Public Employee Retirement Systems.)