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Law would require employers to make auto-deposits into retirement savings accounts
(Editor's Note: Brown signed S.B. 1234 on Sept. 29.)
California lawmakers passed a bill on Aug. 31 that would require certain private-sector employers to arrange for automatic payroll deposits into employee retirement savings accounts.
The bill will create savings accounts for workers whose employers don't offer a pension, 401(k) or other retirement savings option, said Mark Beach, associate state director of communications for AARP California.
States Encourage Savings
California is just one of many states exploring ways to encourage workers in the private sector to save for retirement.
Over 30 states have introduced bills, enacted legislation or at least conducted studies on state-sponsored programs, Benko said, but many have been taking a "wait-and-see approach" to implementation.
"The programs typically apply to employers that don't offer any other retirement plan," Cabral said. Key considerations are keeping administrative burdens on employers to a minimum and making it clear that the employer will not be a plan fiduciary.
"Although [state] bills seek to keep employer burdens to a minimum, certain tasks such as enrollment, withholding and transmittals will fall on the employer," Cabral said.
Regarding the California bill, Parker said the immediate impact on HR professionals will be record-keeping. They will have to spend time deciding who's responsible for developing and distributing informational materials, he said.
The more overarching concern, if issues arise, is whether the employer is going to be held as a responsible party, Parker noted. It may become crucial for the HR professional to show that an employee was provided enough information to make an informed decision about whether to opt out of the program.
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