California pushes forward with retirement program for all workers in state

Workers at architecture firm and general contractor Walker Workshop have planned and built high-end homes from Long Island to the Hollywood Hills. But planning for retirement and building savings is another story.

Like many small business, the 16employee Los Angeles company doesn’t offer a pension or 401(k) plan. Starting in January, though, workers there and at a handful of other companies will be able to start putting money away in state-sponsored retirement accounts.

They’ll be early participants in CalSavers, a program that — if it overcomes a federal court challenge — could soon offer basic retirement savings accounts to millions of California workers.

Walker Workshop and about 20 other companies are signing up this week to be part of a pilot for the program, which will open to all employers in July. By 2022, state law will require California companies with as few as five employees to either sign up for CalSavers or offer their own retirement savings plans.

DeAnna DeLisle, Walker Workshop’s accounting director and office manager, said the company has looked at retirement plans before, but never pulled the trigger.

"We looked at some retirement options, but they were too expensive or too complicated to administer,” she said. “Some required a company match, but, being a small business, it was hard to lock ourselves into that kind of commitment. Some years are good, some years aren’t.”

CalSavers, though, is free for employers. All they have to do is help workers enroll and deduct money from their paychecks. The program is overseen by a state board and accounts are managed by Boston firm State Street Global Advisors.

Workers are enrolled in CalSavers automatically, but can opt out, a system similar to how many companies manage their 401(k) plans. According to research from investment giant Vanguard, workers are more than twice as likely to save for retirement if they are signed up automatically.

But legal questions persist, especially when it comes to automatic enrollment.

The anti-tax group Howard Jarvis Taxpayers Assn. sued California Treasurer John Chiang’s office over CalSavers in May, arguing that the program amounts to an employer-sponsored retirement plan. If that’s the case, CalSavers would be governed by a federal retirement savings law that saddles employers with administrative and compliance costs.

Chiang’s office, backed by California Atty. Gen. Xavier Becerra, argues the program is not subject to — and was designed to avoid — those requirements. That’s because, they say, employees don’t have to sign up and employers are responsible only for helping workers enroll and deducting money from paychecks.

Chiang told the Los Angeles Times earlier this month that he believes the program, including the automatic enrollment feature, complies with federal law, specifically a rule that created a socalled safe harbor for certain retirement plans as long as employers themselves have little involvement and plans are “completely voluntary” for workers.

“Participants sign a form and they have to acknowledge the program,” he said. “We think this fits within the safe harbor.”