Long gone are the days when most employees will be able to work for 20 or 25 years with the same employer or government agency and collect a pension when they finally decide to retire. Even when retirement benefits are offered, they often require employees to contribute to the plans with deductions from their paychecks, and then the money is placed in a mutual fund or IRA administered through a management agency that has entered into a contract with an employer. If the employee leaves the job, any money that has vested must be removed from the policy with a tax penalty or kept in the plan at the cost of the worker, as the company will no longer pay the administrative costs.
According to a recent news article from the Los Angeles Times, President Barack Obama has given his support to an effort in California to give more retirement benefits to employees working in the state. The effort started a few years ago when, as our Orange County employee attorneys can explain, the state legislature passed a law to establish a state-run retirement savings plan that would cover over 6 million employees working the private sector. All of these workers covered by the new plan do not have access to retirement plans through their employer. This would include plans like 401(k)s and 403(b)s in the case of non-profit employers.
However, since these plans are subject to oversight from the United States Internal Revenue Service (IRS), and they must also meet the requirements of the federal Employee Retirement Income Security Act (ERISA), and, in some cases, they are not effective until the federal government has approved the plans even though a valid state law has created them. Mr. Obama has said he feels these plans should be available to employees in need of retirement benefits and said he will do whatever he can to get thorough the federal regulatory review and approval process.
Mr. Obama has further gone on to state that he feels it is necessary for plans such as these to exist, so that people don’t have to rely exclusively on federal Social Security retirement payments and Medicare programs, as these programs are already having budgetary issues and may not provide enough money each for a person to actually retire. To achieve this, Mr. Obama has asked the Department of Labor to establish a proposed set of rules by which these new plans must operate, and to create this proposal by the end of this year. He says this should clear the path forward and get the plans to actually be available for the more than 6 million workers in need of retirement options.
Under this new plan, an employee would automatically have approximately three percent of their pre-tax wages withheld as a contribution to the plan, unless the worker decided to opt out of the plan. The plan would be in place for any employee who works at an agency with more than five employees and does not have an employer provided program available to them.
Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.
Obama wants to help California create more retirement-savings accounts, July 13, 2015, LA Times
More Blog Entries:
Arlington v. Miller’s Trucking – Oral Wage Agreement Weighed, March 15, 2015, Costa Mesa Overtime Lawyer Blog