A new California mandate on employers I completely missed:
It is the first state-run pension program for nongovernment employees and may add as much as $6.6 billion to funds managed by the California Public Employees’ Retirement System, the biggest U.S. pension. Calpers, as the fund is known, has assets of $242 billion.
The law is aimed at businesses with five or more employees that don’t offer pensions or 401(k) savings programs. The law requires companies to contribute 3 percent of a worker’s salary to a retirement account. Workers will be enrolled in the program unless they choose to opt out.
This is just insane, and I don't remember any public debate on it. Given that the government already has a forced retirement program with a much higher percentage contribution (Social Security with 16% of wages when including the employer piece), my guess is that this is meant as a bone for or a bailout of Calpers. Calpers wields enormous political power in the state, and it is entirely believable that they alone are behind this. Calpers is about to be forced to acknowledge that it is billions short of what it needs to cover future pension obligations because it has been assuming unrealistically high returns form its investments. Without those high returns, more money needs to be put in the fund to cover public employee pensions that march to ridiculous levels.
I have skimmed the law, and there is nothing in there about what returns will be paid to these new private employees. My guess is that private contributions will be used as a slush fund to make sure public employees get paid, because they DO have defined benefits, as well as a justification to pay Calpers managers more money. I can absolutely guarantee that when push comes to shove and Calpers is short of money, private employees will see their benefits rolled back and their contributions going to public employees' pockets.
This is also insane for two other reasons:
- In California, there has probably been a zillion lawsuits with the state punishing private entities for running "opt-out" rather than "opt-in" systems. Having to explicitly opt out to keep ones money is a scam only the government is allowed to get away with
- In our company, all but a few of our workers are already retired, working part-time for us to keep busy. The vast majority of our employees, for example, are on Social Security and many also have private pensions. So why am I forced to set up all the expensive infrastructure to provide 401K contributions to people who are all drawing down their 401k's?