I continue to maintain the position that the Secure Choice initiative, quarterbacked by the Senate’s President pro Tem, is an inappropriate task for an already bloated and inefficient bureaucracy like the state of California to assume (MOORLACH UPDATE — Secure Choice in Jeopardy — April 2, 2017 april 2, 2017 john moorlach).
Now that the United States Congress duly voted on a measure to reverse the pension law waiver, created by fiat by the last Administration, to accommodate this proposed strategy, the pro Tem is insisting that the state move forward on this endeavor, anyway. You have to admire his defiance on this initiative (he persists!) and all the others he has pursued this year. But, defiance and temper tantrums are fine when you’re risking your own personal funds. It is not fine when you’re risking other people’s money and wasting taxpayer dollars.
It seems as if the monopoly party in Sacramento has become imperial in nature. They will do what they want to do, regardless of whether it is fiscally proper or prudent. Take these examples for making my case:
* University of California President Janet Napolitano’s arrogance of secretly stashing away some $38 to $175 million, while increasing student tuition rates.
* Governor Brown insisting on the continued building of a high-speed train, even when the funding has dried up and the math to calculate a return on investment to make this project pay for itself finds that future ticket prices will be exorbitant. Consequently, should it actually be built, Californians will be subsidizing every passenger in perpetuity. And this endeavor is still expected to cost an additional $50 billion or more.
* The continued staffing of more than 3,300 unnecessary architects and engineers at Caltrans, costing taxpayers nearly $500 million per year, with the insistence that union dues paying employees will not be repositioned or released.
* Forcing taxpayers to fund the legal expenses of undocumented residents, should they be contacted by federal immigration officials, in order to provide them with due process.
And I could go on. Sacramento is saying, "we will do what we want to do because we are smarter than everyone else." Give me a break. What was that someone said about pride?
The defiance is provided in the LA Times, by the Associated Press (although my quote was truncated and appears to be a little abrupt), and the Capitol Public Radio (which somewhat explains my reference to the private sector), respectively, in the three pieces below. It’s an honor to be the closer.
To those in the media who interviewed me, I recommended that the state would be providing its residents a better service if it gave every taxpayer a copy of George Clason’s book, "The Richest Man in Babylon" (for a brief overview of this long time classic, see https://www.youtube.com/watch?v=XDFukR9pAVI). A recommendation that I made to you last year (see MOORLACH UPDATE — New Government Program? — September 16, 2016 september 16, 2016 john moorlach).
State officials contend California private-sector retirement plan on firm legal ground
By Laurence Darmiento
California officials vowed Thursday to implement a state-run retirement program that could benefit nearly 7 million private-sector workers despite recent congressional action that seeks to block it.
Senate leader Kevin de León and state Treasurer John Chiang said at a Sacramento news conference that the California Secure Choice program is on solid legal footing even though President Trump on Wednesday signed a House joint resolution that withdrew a federal regulation giving states explicit legal authority to have the programs.
“I am here to tell you that we are not backing down,” said De León (D-Los Angeles), who attributed the federal action to lobbying by a “handful of big banks” seeking to protect profits derived from managing private-sector retirement plans.
The program, which the Legislature enacted last year, is aimed at workers who are not offered a pension or 401(k) through work — an estimated 6.8 million in California and 39 million nationally. It is structured similarly to an individual retirement account without any employer contributions.
However, in an effort to maximize the number of workers who sign up for the program, it would allow workers to be automatically enrolled once they sign a form acknowledging they understand the program. Those who do not want to participate would have to “opt out.”
That provision was seen by some employer groups as potentially making the programs subject to the Employee Retirement Income Security Act, a 1974 law that regulates retirement plans and makes employers liable for prudently managing those plans.
De León and Chiang said that, as a courtesy to the California Chamber of Commerce and the California Manufacturers and Technology Assn., they lobbied for a regulation issued by the U.S. Department of Labor last year that excluded Secure Choice and similar plans being developed in other states from being subject to ERISA oversight.
“We did this as a favor to them,” Chiang said.
It was that Obama-era regulation that the House resolution nullified, but the two leaders contended that they thought Secure Choice could operate without the 2016 Labor Department rule.
“That was always our perspective from Day One,” De León said.
In support of their contention, the leaders released a legal opinion on the matter they sought from law firm K&L Gates. It concluded that guidance offered by the Department of Labor provided prior to 2016 offered employers legal “safe harbor” even if employees had to opt out of the program.
However, the opinion assumes that the bill establishing Secure Choice will be amended to exclude any reference to the 2016 Labor Department rule.
The California chamber later issued a statement saying that the retirement plan now appears to be “inconsistent with the existing statute which provides protection for employers from the threat of litigation.” The business group said it plans to seek an independent legal analysis on the matter.
State Sen. John Moorlach, (R-Costa Mesa), a member of the Standing Committee on Public Employment and Retirement, called the program a “noble effort” but urged that it be scrapped.
“Requiring employers to withhold contributions from their workers’ paychecks and send the funds to Sacramento to be invested on their behalf is highly inadvisable. In money management, there is rarely a scheme that has minimal costs and limited risk,” he said in a statement issued Thursday.
Calif. leaders stand by state-run retirement plan
By JONATHAN J. COOPER
SACRAMENTO – California’s treasurer and top Senate leader said Thursday they’re going forward with a plan to automatically enroll private-sector workers in retirement savings accounts even after President Donald Trump signed legislation revoking a legal safe haven for the program.
Senate President Pro Tem Kevin de Leon and Treasurer John Chiang said they believe the program can withstand lawsuits even without the blessing of the U.S. Department of Labor.
But continuing without the federal guidance will require legislative approval.
"I am convinced that while Congress has dealt us a setback, it is not enough to push our coalition off the moral and legal high ground that we hold firmly," Chiang said during a news conference at the state Capitol.
De Leon wrote legislation signed into law last year creating the state-run "Secure Choice" retirement program to automatically enroll most of the nearly 7 million California workers without access to an employer-sponsored savings program. Unless they opt out, a fixed percentage of each paycheck would be deducted and invested through an account similar to a private Individual Retirement Account.
The program was to be administered by a board under the state treasurer’s department.
Several other states have enacted similar legislation, including Connecticut, New Jersey, Maryland, Oregon and Washington.
Many employers have warned that state-run plans could subject them to onerous federal employment regulations and expose them to lawsuits. Former President Barack Obama’s administration issued guidance in October saying that wasn’t the case.
The financial services industry has said the program would be costly for workers who participate and may create political pressure for the state to backfill any investment losses.
De Leon and Chiang acknowledged that going forward with their plans could very well lead to lawsuits against the state but pointed to a memo written by New York attorney David Morse of the law firm K&L Gates. He concluded that prior court cases and a safe harbor established in 1975 by the U.S. Labor Department suggest California’s program could withstand legal challenges.
However, that safe harbor requires that enrollment be voluntary, raising questions about whether automatic enrollment with an option to opt out is truly voluntary.
State officials always believed the program met that test, Chiang said, but they decided to seek the Obama administration’s waiver as a favor for business interests nervous about liability.
Trump on Wednesday signed legislation to overturn the Obama administration rule under the Congressional Review Act, a law that allows a simple majority in the House and Senate to overturn executive-branch regulations that lawmakers consider onerous or burdensome. Trump and congressional Republicans have overturned more than a dozen Obama-era regulations.
Congressional Republicans said the state programs discourage small businesses from offering private retirement plans and have inadequate safeguards. The state plans would be exempt from federal protections that apply to private plans and would have a competitive advantage, Republicans said.
"That’s not a core function of government," said California state Sen. John Moorlach, R-Costa Mesa, who voted against the program and supported Congress’ action. "We’re not here to solve all the problems of the world. The private sector does that."
Calif. Dems Move Forward With Private-Worker Retirement Program
- Sally Schilling
- California’s Democratic leaders are moving forward with a retirement program for private sector workers in spite of a resolution signed Thursday by President Trump.
Secure Choice will offer IRA’s to workers whose employers don’t provide them.
Trump reversed an Obama-era rule that made it easier for states to set up the retirement programs.
Yvonne Walker is President of Service Employees International Union Local 1000.
She says Trump’s action is a setback for workers.
"I, for one, am not comfortable with someone who has worked all of their life, to then have to retire in poverty," says Walker.
But Republican State Senator John Moorlach says workers can set up retirement accounts at banks.
"It’s a choice, it’s a discipline. You know, it’s something you have to do yourself. But to step in with government doing that, I think we’re overstepping our bounds."
California lawmakers approved Secure Choice back in September.
This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District.
If you no longer wish to subscribe, just let me know by responding with a request to do so.