This paper discusses the development of a state-sponsored retirement plan for private sector workers in California who lack access to a workplace pension. The paper explores key plan design choices, including whether participation should be universal or voluntary, who will contribute and carry the risk, and what types of risk protection should be provided. The author considers two different types of plan architecture: individual accounts such as 401(k)s and IRAs, and cash balance plans, which limit employer risk and share some characteristics of defined-contribution plans. Other plan design considerations include sponsorship and governance, regulatory requirements, and default contribution rates. The paper highlights the severe challenges faced by workers in the current private sector retirement system, including the shift from defined-benefit pensions to defined-contribution plans, which have eroded retirement income security.
