Fox Falsely Claims CA Workers Will Be Forced Into Voluntary Retirement Savings Program
Blog ››› ››› HANNAH GROCH-BEGLEY
Fox News falsely claimed California workers would be forced to participate in a proposed retirement savings program, ignoring the fact that workers would be able to opt out of the program at any time and that it is only open to workers who are not offered a retirement plan from their employers.
On the July 26 edition of Fox & Friends First, co-host Patti Ann Browne hyped criticisms that California is becoming a "nanny state," because of a proposal that she claimed would "force private sector workers to lose 3 percent from each paycheck," which would be deposited in a state fund and become available to workers at retirement, plus interest earnings.
But in reality no one will be forced to contribute to California's proposed Secure Choice Retirement Savings Plan. The program would only be for workers whose employers don't already sponsor a pension plan or a 401(k) for their retirement, allowing them to pay into an account that would pay benefits based on account contributions and investment returns. Any workers who don't want to participate can opt out.
Ben Harris, a former senior economist with the President's Council of Economic Advisers, wrote at the Tax Policy Center's TaxVox blog that the program is "entirely voluntary," and the use of automatic enrollment which workers can opt out of has the potential to "bring more than 6 million workers into the retirement saving universe":
California's plan shows exceptional promise. By utilizing automatic enrollment, which has been proven to bolster enrollment in private 401(k) plans, the plan could bring more than 6 million workers into the retirement saving universe. It takes advantage of a pooled investment strategy to lower administrative costs and ensure a balanced investment portfolio. The benefits would be progressively distributed. Workers take the accounts with them if they switch jobs. The plan is entirely self-funded with no extra cost to taxpayers. And it's entirely voluntary; workers who do not want to contribute may opt out.
Furthermore, the plan is reportedly likely to cost the California state government nothing, as it is designed to be privately run and managed. As the National Journal reported, most workers who will be eligible for the program make less than $46,420 a year, and rely heavily on Social Security in retirement. The program would offer this "underserved population" added security in retirement.
Economists and financial experts have praised the plan, such as Shlomo Benartzi, a behavioral finance expert and professor at UCLA, and Richard Thaler, a behavioral economist at the University of Chicago, who told NPR that automatic enrollment in the plan was "key" to its success.