A retirement plan for the forgotten

All politics is local, a wise man once said. And you can’t get much more local than your own aunt.

State Sen. Kevin De Leon’s 74-year-old aunt Francisca still cleans homes in San Diego, as she has for nearly half a century, since migrating from Mexico with her sister, the lawmaker’s late mother, seeking the American dream.

Both cleaned up for rich people, barely squeezing by from one check to the next, never with enough money to sock some away for old age.

Now De Leon (D-Los Angeles) is teaming up with Senate leader Darrell Steinberg (D-Sacramento) to lessen that prospect of poverty in the declining years.

He’s proposing legislation that would allow the likes of his aunt to enroll in a modest state-operated retirement program financed by the beneficiaries with virtually no cost to employers or taxpayers.

Sound too good to be true? Possibly. But it’s certainly worth exploring.

In an era of constant cutting of state programs to close budget deficits, this would be one positive step to actually improve the lives of some people — millions, in fact.

It could work parallel to public pension reform, which the Legislature and Gov. Jerry Brown are agonizing over in a volatile election year. While the lawmakers presumably will be reducing pension benefits for future public employees, they could be providing some retirement security for private-sector workers.

“It’s a very important bookend to the pension debate,” Steinberg says. “The debate in society is ‘Why should some folks get a [traditional pension] when the majority no longer do?’ This asks a different question: ‘Why shouldn’t we strive to bring everyone up to a reasonable and decent level of retirement security?’”

The Senate leader is signing up as a joint author of De Leon’s bill, assuring it of some heft, at least in the upper chamber. The measure will require only a majority vote for passage, meaning Democrats could easily send it to the governor without Republican help.

Because it doesn’t require employers to match workers’ contributions, Brown is flashing the green light to proceed. The governor supports the concept, De Leon says, but whether he signs the bill will depend on its final details.

De Leon’s proposal would set up a voluntary and portable retirement savings plan that workers could carry from one employer to the next.

The state treasurer’s office would oversee the program and set the contribution rate at around 3%. The California Public Employees’ Retirement System would manage the funds conservatively. Unlike a 401(k), benefits would be guaranteed — based on a worker’s savings — but be much smaller than traditional pensions. The idea is to supplement Social Security.

Employers with five or more workers would be required to either enroll their employees in the savings program — and deduct the money from paychecks, as they already do income taxes and Social Security — or offer their own retirement plan.

There are 6.7 million Californians who work in jobs without retirement plans, according to the UC Berkeley Center for Labor Research and Education. An additional 1.7 million are self-employed, like De Leon’s aunt. They’d have to send in their own savings, as they do Social Security.

“We’d have to educate people, especially in low-income neighborhoods where there is no culture of savings,” De Leon says. “This plan is universal, affordable and portable. It allows people to take personal responsibility for their own retirement at no cost to taxpayers. It gets them in the game.”

Too late in life for De Leon’s aunt, however. She’s past the point of being able to tuck away a cushion for retirement.

She makes do each month on $430 cleaning houses, $637 Social Security and a modest check from nephew Kevin. Francisca is above the poverty line, but stays there only as long as she’s able to work.

“She has worked six days a week all her life cleaning homes for wealthy people,” De Leon says. “She has nothing to show for it other than a strong work ethos.”

Ditto his mother until she died of ovarian cancer at age 54, the senator says.

“California has a massive service industry,” he continues. “Hotel housekeepers. Coffee-shop workers. None have much of a retirement savings. Legions are living in poverty trying to rely on an extremely strained social-services safety net...

“There’s a bigger retirement time bomb ticking than anyone realizes.”

It’s a perfect storm, actually: The inequality gap is widening between the haves and have-nots while the private sector scales back retirement security for its workers. Meanwhile, baby boomers are retiring and people are living longer.

The UC Berkeley labor think tank, in a report last October, projected that “nearly one-half of California workers will face significant economic hardship in retirement.”

It also noted that “women and minorities are disproportionately represented among retirees in poverty.”

And it added: “Significantly, the middle class also faces substantial risk of not having enough retirement income to meet even basic expenses.”

California politicians, businesses, unions and workers all “should weigh the long-term social and fiscal implications of a workforce that, over time, enters retirement in deepening economic distress,” the report concluded.

Let’s sum up those implications real quick: It means a greater burden on government — and very little pocket change to spend on movies, restaurants or even groceries. Bad for the economy.

There’s no perfect solution. But struggling people like De Leon’s aunt long ago gave up on perfect. A little opportunity to help themselves would be good.

george.skelton@latimes.com