A California Chamber of Commerce-opposed bill mandating private non-unionized employers that do not offer a retirement plan to enroll their employees in a government-created defined benefits plan will be heard in the Assembly Appropriations Committee on August 8.

SB 1234 (DeLeón and Steinberg) subjects employers to significant cost, fiduciary responsibilities and liability with no commensurate benefit to employees by requiring employers without a retirement plan to enroll their workers in the new “California Secure Choice Retirement Savings Program” or pay a penalty of $250 per employee.

Small Business Burden
The new risks mandated by SB 1234 (which applies to employers with as few as five workers) could be particularly harmful to small businesses that can’t afford the added liability, including the duty to properly educate employees about the retirement options available so the employees can make an informed decision.

Employer Liability
Retirement plans for private sector employees are regulated by the federal Employee Retirement Income Security Act (ERISA), which subjects participants to significant responsibilities and requires every employer participating in the program to file annual reports and actuarial valuations.

According to a recent legal opinion, employers participating in the program would be subject to these ERISA requirements and would incur significant fiduciary responsibilities.

Citing U.S. Department of Labor advisory opinions, the legal opinion concludes that under SB 1234 “each employer sponsor of a plan that participates in the arrangement will be subject to ERISA’s fiduciary provisions.”

Among other responsibilities, California businesses would be personally liable to make good to the plan any losses resulting from any breach of the new fiduciary responsibilities.

Action Needed
The CalChamber and a coalition of businesses, insurers and employer groups argue that the effort, liability and expense of SB 1234 are unnecessary given that California already has a highly competitive retirement savings market. The CalChamber is urging members to contact legislators and ask them to oppose creating the new retirement program in SB 1234.

Visit CalChamber’s Top Stories for more information on SB 1234.

Author: HR Watchdog, HRCalifornia’s Employment Law Blog, © California Chamber of Commerce