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News & Press: CalAdvisor Newsletter

December Legislative Report

Friday, December 2, 2016   (0 Comments)
Posted by: Shari McHugh
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California Secure Choice Savings Program – SB 1234 (De Leon)

The bill that gives the California Secure Choice Investment Board (SCIB) the power to implement the Secure Choice Program was signed by the Governor after NAIFA-California, the Association of California Life and Health Insurance Companies and others in the business community went neutral on the bill. 

SB 1234 provides legislative approval for the California Secure Choice Retirement Savings Program (SCRSP) and set forth recommendations and requirements for the design and implementation of the program.  The program would provide state administered retirement savings for private sector employees who do not have access to employer-sponsored retirement plans. 

Before enrollment can begin, a number of hurdles must be overcome and the SCIB must go back to the Legislature to confirm the hurdles have been overcome.  In addition, a budget loan for the estimated $135 million in startup costs must be secured (only $1.9 million appropriated in 2016 budget). 

The SCIB must also:

  • Ensure the proposed plan qualifies for an ERSISA exemption under the U.S. Department of Labor (DOL) safe harbor rules, and address what appears to be a direct conflict between DOL instruction that the state accept financial responsibility for the plan, and SB 1234, which expressly prohibits the state from accepting any liability or investment risk.
  • Devise an investment plan that meets federal tax and securities rules.
  • Recruit a third party record keeper with the personnel and capability to administer a plan which covers thousands of employers and millions of employees, who are constantly changing jobs, have multiple jobs and must be tracked over long periods of time and possibly across state lines.
  • Build and roll out the necessary education and outreach necessary to educate plan participants; build a system of communication that allows workers to make informed decisions, and increase the financial literacy of this very fragile target population – all the while indemnifying employers.
  • Establish rules and regulations concerning; the percentage of the auto deduction and annual escalation, hardship withdrawals and settlement options at retirement.
  • Keep total management and administration fees charged to participants under 1 percent of their contributions.
  • Repay any loans made from the state general fund.

NAIFA-California will continue to work with ACLHIC and others, including policymakers and the Secure Choice Board as they begin putting together an operational model that meets all of the conditions described above.

LEGISLATIVE ISSUES OF INTEREST IN 2016

NAIFA-California’s Sacramento team was very busy in 2016 working on a number of issues that are very important to NAIFA-California members.  Here is a quick overview of some of the issues and the ultimate outcome:

Long Term Care Bills of Interest 

The three long-term care bills moved through the process in an attempt to address the highly challenged long term care marketplace are headed to the Governor. 

NAIFA-California supported AB 2366 by Assemblyman Matt Dababneh (D-Encino) and the bill was signed by the Governor.  AB 2366 was designed to help insurers with getting new and innovative long-term care products to the marketplace.  The bill exempts insurers that offer a policy that combines both life and long-term care (LTC) coverage from the requirement to offer the new policy to their existing long-term care policy holders.  

Two other bills that were considered were SB 1091 and SB 1384 by Senator Carol Liu (D-Pasadena). 

SB 1091 was vetoed by the Governor, but SB 1384 was signed.  Among other things, SB 1384 creates a task force to discuss long term care issues and to make recommendations.  NAIFA-California is hopeful that the work done by the task force will result in proposals that will ultimately improve the marketplace.  In addition, NAIFA-California will be participating in the process to help ensure that is the case.  

There will be additional efforts in the coming months and years to further address the problems in the marketplace, and NAIFA-California will be part of the dialogue.

Other Bills of Interest 

NAIFA-California was pleased to support, along with CAHU and IIABCal, SB 923 by Senator Ed Hernandez (D-Azusa), which was signed by the Governor.  The bill makes it clear that in the individual (grandfathered and non-grandfathered) and non-grandfathered small group markets, a health care service plan contract or health insurance policy that is issued, amended or renewed on or after January 1, 2017 may not change any cost sharing requirements during the plan year or policy year. 

NAIFA-California supported AB 1899 by Assemblyman Ian Calderon (D-Montebello), which was signed by the Governor.  The bill requires the CDI to offer the licensing exam for life agent, life-only agent, and accident and health agent licenses be provided in English and Spanish. 

Lastly, NAIFA-California supported AB 2456 by Assemblyman Calderon, which was signed by the Governor.  The bill requires the Instructional Quality Commission (IQC), during the next revision of the history-social science framework, to consider including information on financial literacy.

AB 2884 (Committee on Insurance) – The bill was sponsored by the CDI and, among other things, amends the Annuity Nonforfeiture Law. According to the Senate Insurance Committee analysis, “The existing statute CIC 10168.6 clarifies what the maturity date in an annuity contract is deemed to be when applying the nonforfeiture tests described in CIC 10168.4 and CIC 10168.5 to a contract under which an election may be made to have annuity payments commence at optional maturity dates. By specifying a fixed maturity date at some artificially high age, insurers are currently able to sell contracts to California consumers which will effectively provide annuity benefits of a very limited duration, if at all, and which contain higher surrender charges than equivalent contracts with optional maturity dates or contracts which specify a reasonable maturity date. The proposed language would clarify that the deemed maturity date used in the nonforfeiture compliance testing will be the same for contracts which have a fixed maturity date beyond what is considered reasonable, and for optional maturity date contracts. The proposed change will help protect seniors from purchasing annuity contracts which contain high surrender charges that may apply for a period that exceeds their expected lifetimes.”

The insurers and NAIFA-California were neutral on the bill, but we are hearing from insurers and agents that this change is causing a disruption in the marketplace and could result in seniors having fewer options when considering annuities.  We are working to see what, if anything, can be done to address some of the concerns.


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