Last week a state board that is beyond obscure held its initial meeting. The board has no state funding, will have to beat the bushes for private grants to conduct its business, and has no guarantee that the work it will do will ever amount to anything.
But the work of California Secure Choice Retirement Savings Investment Board could be of momentous consequence. It is charged with creating a first-in-the-nation program to address what is arguably the most worrisome financial crisis in America -- a retirement savings fiasco that threatens to condemn tens of millions of workers to living their final years in poverty.
As a report from the New America Foundation concluded earlier this year, the nation's transition from pension-based retirement benefits to a 401(k)-based system "is on its way to becoming a failed social experiment."
Here are some numbers to back up that assertion:
-- About half of all workers in the private sector work for companies that do not provide any defined-contribution retirement savings plan.
-- The Census Bureau reports that the median retirement savings for the 29 million American workers ages 50-64 in the bottom half of income-earners is zero. For the 14.5 million in the 50th to 75th percentile in income, the median is $6,500.
All these people will discover in a few short years the hard, month-to-month reality of what they already know: Social Security alone will not be enough.
A great many thoughtful economists have examined this situation and sounded an alarm about the impending retirement-security crisis. To date, only one government entity -- the state of California -- has taken even a baby step toward addressing it.
Last year, Gov. Jerry Brown signed a bill by Sen. Kevin De Leon, D-Los Angeles, to start testing the waters for a process that could provide universal access to a tax-deferred retirement savings plan.
The new plan would be available only to those workers who now have neither a pension nor access to a 401(k) plan, so it would by definition target workers with modest incomes.
The idea is to provide something that is more reliable than a traditional 401(k). Unless they opted out, workers would have 3 percent of their pay withheld and deposited into an individual retirement account.
The account would be in their name, and their contributions would follow from job to job throughout their working life.
The money would be placed into a pooled fund, which would have low management fees and be conservatively invested. The funds would be protected against loss of principal.
"There is strong public sentiment for a solution to this looming retirement crisis. If we fail to heed this crisis, our economy will plunge again," De Leon told the savings board as it opened for business last week. "This is what innovation looks like. What we're saying is that we have a better idea for a light bulb in California."
The wiring to light that bulb is still far from complete. The Internal Revenue Service must make a determination that it would qualify for tax-deferred status.
Already, a hoped-for provision that would have allowed employers to voluntarily contribute to their workers' accounts has been stricken because it would run afoul of federal law that pre-empts states from regulating employer-based retirement benefits.
At the state level, the board, chaired by Treasurer Bill Lockyer, has many questions to explore. Would enough workers participate to make the program self-sustaining? What investment options best meet the program's goals? Should insured-income products, such as annuities, be included?
It will have to answer all these questions and more by relying solely on about $500,000 in private grants, likely to come from nonprofit foundations. No state funding has been provided.
For starters, the board has asked the financial services industry to help answer its questions.
The board's timetable calls for making an up-or-down recommendation to the Legislature on whether to proceed by Jan. 1, 2015. After that, the Legislature would have to act again to actually implement the program.
These accounts will not make anyone rich. A 35-year-old worker making $25,000 a year, having 3 percent of her paycheck withheld and earning 3 percent annual interest would accumulate a little less than $50,000 by age 65.
De Leon hopes that these accounts will "set a foundation from which to build."
The goal, he said, is as simple as it is urgent: "to provide a modicum of dignity and respect" for workers of modest incomes who now face the likelihood of living out their final years in poverty.