Bill would help workers save more

0 Comments | Oakland Tribune, Apr 10, 2008 | by Mike Zapler

SACRAMENTO -- Workers who aren't offered a retirement savings plan by their employers would be able to set up a 401(k)-style account through the state of California, under a proposal unveiled Tuesday by a Democratic lawmaker and backed by Republican Gov. Arnold Schwarzenegger.

The plan is aimed at the 6 million employees in California -- more than two-fifths of the work force -- who aren't offered a pension or retirement savings plan.

"We're talking about the working class, the working poor in the state of California, (people who) "don't deal with derivatives or hedge funds, who don't receive their monthly statements from Merrill Lynch or AG Edwards," said the bill's author, Assemblyman Kevin de Leon, D-Los Angeles.

Schwarzenegger was scheduled to join de Leon but canceled shortly beforehand, citing a scheduling conflict. The governor later issued a statement endorsing the plan, boosting the chances it will be enacted.

Assembly Bill 2940 would make California the first state in the nation to open its public retirement plan to workers in the private sector, supporters said, although several other states are considering the idea.

The program would allow employees at businesses without pension or 401(k)-style retirement plans to set up savings accounts through CalPERS, the California Public Employees' Retirement System.

Participating workers would have pre-tax earnings deducted from their paychecks and deposited into the savings accounts. Employers could choose to provide matching investments. Workers would be able to carry the accounts from job to job.

"We know that people save best through payroll deductions," said Olivia Calderon, the California legislative director for the New America Foundation, a think tank advocating for the proposal. "But today, too many Californians don't have the option to save at their workplace."

Saving today would lessen poverty among tomorrow's elderly.

According to de Leon's office, 40 percent of elderly women and 30 percent of elderly men derive more than 90 percent of their income from Social Security. But the average monthly payment is only

$1,080, significantly less than they need to sustain them. That increases the likelihood such people will need more help from the government for housing and medical care.

Proponents said the plan would be administered with money raised from fees on participants so no new taxpayer money would be needed.

The proposal, Schwarzenegger said in his statement, "will help make businesses more competitive, without costing them anything, and will help employees save for their retirement, without costing taxpayers anything, either."

Contact Mike Zapler at mzapler@mercurynews.com or 916-441-4603.