Covered California has been such a success at driving up healthcare premiums and blowing through $1 billion in federal subsidies that the state legislature’s liberal Democrats are poised to launch “Secure Choice” in an effort to take over Californian’s individual retirement accounts (IRAs).
With little fanfare, Sacramento passed the “California Secure Choice Retirement Savings Program” in 2012 to provide an “Automatic IRA” deduction out of the paycheck of every California worker in a company with 5 or more employees.
With the State Treasurer and a nine-member board appointed by liberal Democrats as trustees, the plan promises to offer workers the type of low cost and sophisticated institutional management that the state uses to manage its own pensions.
But as Breitbart News has reported, the California Public Employees’ Retirement System, which manages state pensions, is embroiled in scandal for paying 20 percent hedge fund management fees. Moreover, its former CEO is in prison for bribery, and CalPERS recently admitted that the pension plan was only 52 percent funded–the worst of any state in the nation.
Despite all of this sordid drama, liberals claim that the State of California, as the world’s largest pension fund manager will enjoy access to better investment deals and will produce higher returns than individuals can find. The latest investment report by CalPERS for the year ending June 30, 2015, shows a return of only 2.4 percent. That performance was far below the CalPERS target return of 7.5 percent.
Secure Choice claims the “Automatic IRA” is not mandatory, because there is an opt-out clause. But poor employees that need money the most are probably not sophisticated enough to understand how to fill out the paperwork to opt out. Their employers will not want to give any instructions, for fear of being sued for giving investment advice.
Secure Choice will offer two investment choices. One plan option has no protection against investment losses; the other option will supposedly create a reserve from good annual performances to cushion losses in bad years.
Liberals are spinning Secure Choice as an opportunity for workers to have a more secure future. But that is the same argument liberals made for Covered California. With healthcare premiums spiking much faster than inflation and co-pays jumping, every Californian with insurance knows California’s Obamacare initiative has hurt workers.
What few taxpayers understand is that Covered California would have caused healthcare rates to spike even higher, except that the state in 2013 received $1.06 billion in federal dollars to subsidize the program’s administrative costs. But due to massive cost overruns, that money is already gone, and healthcare premiums are expected to spike even higher next year.
The question on taxpayers’ minds regarding Secure Choice should be: what happens if the stock market tanks or the state’s supposedly sophisticated money managers make investments that are big losers? Lawsuits will start flying, and then the liberal California legislature will undoubtedly want to bail out their liberal friends running Secure Choice.
After 2.5 years of spending money in planning, the Secure Choice board sent it investment proposal to the liberal-dominated California legislature last week. The “Automatic IRA” is plan is expected to get final approval at a March 23 meeting.