California Secure Choice Retirement Savings Investment Board

What This Means for Employees

When the Secure choice program is open for business, employees, who work for an employer that does not provide an employer-sponsored retirement plan, will be able to make an automatic payroll contribution into their personal Secure Choice IRA account. An employee can choose not to participate. The account will stay with the employee from job to job throughout their career. Upon retirement, the employee could take all their money out or convert it to a monthly income stream.

How do employees participate?

Enrollment in Secure Choice is voluntary for employees. If an employee enrolls, but decides they no longer want to participate, they may opt-out of the program at any time. Employees will be given an opportunity to re-enter the program during an open enrollment period at least once every two years.

How do participants contribute to their account?

Once enrolled, participants will contribute to their account via automatic contributions from each paycheck. Employees can choose to set their own contribution rate. If a participant does not set their own rate, they will contribute a default rate to be set between 2% and 5%.

The Secure Choice Board will consider adopting automatic escalation, in which employee contributions would be automatically increased by 1% annually up to 8% each year.

How will contributions be invested?

For up to the first three years of the program, the Board will establish managed accounts invested in U.S. Treasuries, or similarly low-risk investments. During that time the Board will develop investment options that minimize fees and provide maximum possible income replacement balanced with appropriate risk. The Board may also develop investment options that address risk-sharing and smoothing of market losses and gains.

Will there be a cost to participate?

As in any retirement plan, there will be a small administrative fee to pay for the costs of the program. State law places a cap on those fees and requires the Board to minimize fees to the maximum extent possible.

Could an employee take money out in case of an emergency?

The Board understands that in emergency situations participants may want to access their retirement savings. However, early withdrawals from retirement plans may be subject to certain taxes and penalties due to federal laws. For more information, please visit the following page on the Internal Revenue Service (IRS) website. 
https://www.irs.gov/retirement-plans/hardships-early-withdrawals-and-loans

What happens if an employee changes jobs and their new employer doesn’t participate in Secure Choice?

Secure Choice accounts will be portable. The employee’s Secure Choice account will remain active throughout their career unless they choose to stop participating. The statute requires the Board to develop a process for employees to continue to contribute to their account, but it would not require employers, who already offer a retirement plan, to enable an automatic payroll contribution.