Why does California’s Secure Choice program still exist?
California’s planned “Secure Choice” program, if implemented, would violate federal law. So why are we needlessly spending public tax dollars on its startup costs?
The concept of the program seems harmless enough: A voluntary program — at least for now — that would enroll private-sector employees who currently don’t have a retirement plan into a state-run retirement savings account.
But as with any government program, the first question is why is this program even needed? Private-sector employees pay into the Social Security system and, upon reaching retirement age, draw benefits from it. While some have argued that Social Security benefits are inadequate, the program is nonetheless backed by the full faith and credit of the federal government. Moreover, under federal law, there are many programs to assist private-sector workers whose employers don’t offer 401(k) or other employer-based plans. These include individual retirement accounts, both traditional and Roth IRAs. For workers without an employer retirement plan, there are generous limits on how much can be saved tax-deferred.
Secure Choice is a solution in search of a problem. Given all the existing retirement programs authorized under federal law and managed by private investment firms, the only reason to adopt a massive new government program is so that government can control yet another part of the economy currently being serviced by the private sector. Progressives truly believe that government can do it better.
But better than what? The California Public Employees’ Retirement System and other public employee retirement funds are carrying unfunded liabilities in the hundreds of billions of dollars.
Then there is the cost to taxpayers. While the program is ostensibly voluntary, the startup costs of the program are huge. For fiscal 2017-18, the Secure Choice program has requested a $170 million general fund loan for staff, external consultants, overhead costs and related expenses. Speaking of “choice,” it’s too bad taxpayers didn’t have a choice in seeing their dollars spent on this questionable program.
Finally, there is the risk to taxpayers in the event Secure Choice goes bankrupt. Defenders claim that this can’t happen, but remember that officials in Stockton, Vallejo and San Bernardino once said the same thing.
From the beginning, the legality of Secure Choice, and similar programs in mostly liberal states, has been questioned because it is inconsistent with a federal law known as the Employee Retirement Income Security Act of 1974. ERISA imposes requirements for retirement plans in the private sector. Because the Secure Choice programs appeared to be in clear violation of ERISA, those states that sought to adopt those programs received a regulatory interpretation from the Obama administration which, the states argued, granted them an exception. Forgetting for the moment the issue of whether that federal regulation was even legal (a recurring problem for much of President Obama’s regulatory efforts), it was rescinded shortly after President Trump took office.
The upshot is that the weight of legal authority is that California’s Secure Choice program, if implemented, would violate federal law. Until California and other left-leaning states convince Congress to grant them an exception — something very unlikely for the foreseeable future — spending further taxpayer dollars on planning and set-up costs is a waste.
California law allows taxpayers to commence legal actions, including injunctions, against government entities for waste of public funds. See, e.g. Code of Civil Procedure Section 526a. As long as California continues to spend taxpayer dollars on a program that, on its face, violates federal statute, it is vulnerable to legal challenge. In any event, don’t we have better things to spend our money on?
Jon Coupal is president of the Howard Jarvis Taxpayers Association. This column appeared in the Orange County Register on February 18, 2018.