News and culture through the lens of Southern California.
Hosted by A Martínez
Airs Weekdays 2 to 3 pm

Mandatory retirement accounts for California's low-wage workers faces uncertain future

A close up of a 401k investment portfolio.
A close up of a 401k investment portfolio.

Listen to story

Download this story 4MB

The folks in Washington have been bumping heads with California a lot lately. One of those sore points is a state initiative called "Secure Choice". The program came about as a way to create retirement savings accounts for low wage workers.  

Now, the word from Capitol Hill is that it and similar programs across the country may be cut short before ever taking effect. Take Two's A Martinez spoke with Evan Halper who's covered the current status of Secure Choice for the L.A. Times. 


How does "Secure Choice" work?

The idea is to take the share of the workforce that is working right now but is not enrolled in any kind of retirement program. No 401K. No IRA. That's about half the workforce across the country. It's close to 7 million people in California. And it would just automatically put people in kind of like a state-sponsor program that would be similar to the 529 programs for college savings, that'd be managed by some financial company. They'd take a share of your salary, probably 3-5 % and invest it in a retirement plan so you'd start saving. 

Why make access to retirement plans mandatory? 

Basically, states are starting to deal with the burden of all these people retiring in poverty. Even though they're "working poor"— they're working but they have nothing set aside. They're trying to live on just Social Security, that's not enough. It winds up taxing all these state resources. So, they're looking for a solution to this problem so less people need to go on Medicaid, use food stamps, rely on the safety net. That motivated states to start looking at these kinds of creative programs. 

What's in the foreseeable future for "Secure Choice"?  

Congress has this obscure authority that they've been using a lot of where, if it's a relatively new regulation passed within the last few months, they can use this authority to repeal it. 

If Congress actually goes ahead and repeals this Department of Labor regulation that all of the state programs hinge on, it's very likely that President Trump will approve it. These states will have to go back to the drawing board. It doesn't mean that the programs all die or can't go forward. But in some cases, new legislation may have to be passed. It certainly makes the programs more legally vulnerable if they try to sidestep the Department of Labor and just implement them without federal approval. 

*Quotes edited for clarity. 

To hear the full interview, click on the Blue Media Player above.