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TO

:

Richard Pan, Chair
Senate Public Employment and Retirement Committee
Members, Senate Public Employment and Retirement Committee

FROM:

Norwood & Associations
Lang, Hansen, O’Malley & Miller
Sloat Higgins Jensen & Associates

DATE:

April 6, 2016

RE:

SB 1297 (Pan) – OPPOSE

On behalf of the organizations and entities appearing on this letterhead, we are writing to inform you of
our collective opposition to the above-referenced bill.
SB 1297 would make a substantial public policy change by adding a new article to the Government
Code which would allow state and local public entities to automatically enroll their employees into an
employee-paid supplemental retirement plan chosen in whole or in part by the employer. This proposal
is a severe departure from current law which specifically empowers employees of state and local
governments to freely choose where and when to invest their own dollars.
The bill is at the behest of one insurance company and is aimed at altering what is currently a very
competitive market for supplemental retirement programs offered to public employees, which currently
provides a wide array of investment options. This bill is contrary to the express requirements of
Insurance Code Section 770.3 which affords employees in 403(b) plans the right to designate the
licensed agent, broker, or insurance company for the purchase of an annuity and prohibits any state
department, agency, school district or local governmental agency from requiring that such insurance or
annuity be purchased through a particular insurance agent, broker or insurance company. The effect of
such a change would be a de facto elimination of the individual employee’s right to make the decision of
when, with whom, and how much to invest in a supplemental retirement plan. Instead, the employee will
be enrolled into a plan chosen at least in part by the public entity employer. Insurance Code Section

770.3 was enacted over 30 years ago to ensure choice of vendors for such programs. We view SB 1297
as limiting the “freedom of choice” principle that was designed to protect public employees.
Interested parties have been informed by staff over the last ten days that there could be substantial
amendments to the bill, but we were not afforded access to these amendments until they came into print
three business days prior to the bill being heard. This has limited our ability to fully respond to the bill
as amended to be heard on Monday April 11th. However, we believe it is fair to object to this legislation
at this juncture because it is a major departure in public policy with little or no background or study
relative to any urgent need for such a significant change. It also raises a major public policy question
that such legislation should emanate from one competitor in this field; and the recent amendments do not
respond in any way to the fact that SB 1297 in fact eliminates a public employee’s free choice of
supplemental retirement plans.
In summary, SB 1297 purposes to make substantial changes to a very complex system and proposes to
do so without sufficient time for review and participation by all interested parties. At the very least, SB
1297 should be held over for additional discussions.
For all above reasons, we urge your “NO” vote on this bill when it is heard in committee on April 11th.
Thank you.
cc:

Pamela Scheider, Executive Staff Director, Senate Public Employment and Retirement
Committee
Gary Link, Consultant, Senate Republican Caucus
Darin Walsh, Office of Senator Pan
Anna Alvarado, Office of Senator Beall
Tara McGee, Office of Senator Hall
Lance Christensen, Office of Senator Moorlach
Joanne Stacey, Office of Senator Morrell