Legislatures breaking the backs of California businesses

November 5, 2012

Joe Schimandle


I was not aware of Senate Bill 1234 until after it was passed in Sacramento and was signed by the Governor. So after becoming aware of it, I just spent some time reading the entire bill.

Basically, the bill requires workers in private businesses with five or more employees to contribute a mandated 3 percent of their wages to a government managed pension plan.

Employees can “opt-out” of participation in the plan. However, they proactively must complete and file a provided form to do so. If they do not submit the opt-out form, their employer must withhold from their wages and remit the amount to the State.

Employers are not required to contribute into the retirement fund (yet). This is a strictly employee-funded retirement savings plan. However, I assume employers will be required to administrate the participation of their employees.

In any case, I started thinking about what the effect will be on employers. As the owner of a small business, I will have to:

(1) familiarize myself with the rules and regulations with which I will be required to comply and stay current with future changes to the system,

(2) disseminate information to employees so they can register in the system,

(3) probably try to explain the program to them (does this create liability on my part?),

(4) transmit their participation forms or opt-out forms to the state,

(5) withhold from their paychecks every payroll,

(6) send the withheld amounts to the state every payroll along with some kind of transmittal form to be created and updated for every mailing,

(7) learn and set up systems in my office to comply with electronic transmission of employee money if that requirement is placed in service,

(8) monitor employee opt-out elections every two years, and ultimately

(9) wait until the state tells me that I must match my employee’s savings contributions. Then if I screw up somewhere along the line, I face penalties of up to $500 per employee.

The fact that the state will administer the investment of ultimately billions of dollars of private workers’ retirement savings is a totally different matter that I do not have time to get into here. I’m busy running a private business…

Don’t you just love it?

So there you go. The progressives in our legislature are breaking the back of businesses in California. They just keep dreaming up new regulations that swamp small firms in paperwork and compliance issues. And almost every provision has fiscal penalties for non-compliance – a very unfriendly atmosphere.

In addition to my duties as a co-owner of and accounting and tax firm, I also provide financial planning and investment services to my clients. In my experience, only a small number of employees voluntarily contribute to employer-sponsored retirement plans like 401(k) or simple IRA plans – maybe 25 percent to 50 percent.

So it would seem this SB 1234 would have similar participation rates and would not solve employee retirement issues as they are thinking it will. However, they will probably find higher participation rates than private plans because they are mandating participation. Employees have to proactively opt out of the program and many won’t take the time to learn how to do that.

Joe Schimandle CPA is the managing partner of the accounting and tax firm Schimandle & Associates LLP and proprietor of S&A Financial Services in Arroyo Grande California serving his clients since 1977.



Taken from the SB1234 website:

(3) The program fund is privately insured and is not guaranteed by the State of California.

Not guaranteed? Who makes sure that private insurance carrier is an A+XV rated company at all times? What happens if that insurance carrier goes insolvent, or requires a substantial bailout like AIG?


Good gravy!


If it requires a bailout like AIG they (state legislature) will do like the U.S. congress did. Throw money at something that we don’t have money for.


Except the federal government can rent as much money as they need from the (private bank) Federal Reserve… the state of CA has to steal it the old fashioned way: taxation.


No one will be able to stay in business here as the government continues to regulate, rob and assess for wastefull programs and salaries and pensions. The govermment is already going after property owners with the fire assessment fees in order to shirt prop 13. These guys dont get it and they are in the process of destroying our state. They will keep at it until there is nothing left to steal.



This is just another reason why small enterprises doesn’t grow and hire employees!!!

The delusional elitist at the state house just assumes there’s this golden pot at this magical private enterprises rainbow!!!

….yea as soon as you try to become independant or “self-employed” the state chimes in with another burden..


SB1234 is simply another bullshit shortsighted attempt to transfer an estimated $6.6 billion dollars into the public pension system, so it can be raided to cover past abuse, malfeasance and fiscal recklessness that has bankrupted the state’s pension fund.

Pension reform has become a hot issue these days as we become a poorer indebted nation because both government institutions and large corporations have promised more than they can now deliver.

As in 1982 when our California State government struggled to balance its budget, lawmakers proposed a handy way to generate hundreds of million dollars by raiding the state employees’ pension fund, thus creating another cash cow to milk at will as they are doing today.

As stated, we already have defined contribution pension programs such as 401(K) programs available in the private sector. This legislation is just another corrupt attempt to continue on the path to California’s eventual bankruptcy.

Randy Sheila

I TOTALLY AGREE, besides, conceptually, retirement courts obsolescence. Look at Social Security, WHAT A SCAM. By the time I reach my 70’s in the 2030’s, the age will have been raised many more times and the benefit will be nil…and I started paying into it at age 14! Maybe in the future, we won’t retire, we’ll join the revolution or live off the land is communes or work for the richest and most powerful warlords. Or maybe I should just accept that conventional retirement won’t work for me, stop paying now and save the money so I can live larger now and donate whatever is left of me to science at age 70 (the world will probably SUCK by then anyway). Now that’s a plan that won’t cause too much grief for anybody else. Too bad so many folks lost so much of their saving and retirement in the latest economy, of course some of the younger ones only had their real estate assets to bank on, so I’m sure they’re OK and will retire in comfort. Of course, they’re easy to forget about, since they’re part of a small generation and so far from retirement. What red thumbs to balance this perspective? All I hear is whining and bitching from those who have the most…life in a vacuum.


Technically, you never “paid into it” – Social Security always has been just another TAX. There is no account with earmarked funds that you put into it, only a promise of “something” when you “retire.”

Ponzi schemes are only legal when the government runs them.


Another example of regulations that discourage business. Aside from the additional paperwork and record keeping for the business, there’s the bureaucracy to oversee it. And employers will probably get hit with additional taxes to pay for it. Is it any wonder that California is in such a financial mess? Why would business want to relocate to this state with all its taxes and regulations when they can go to states like Texas? This used to be a great state, but they’ve sure screwed it up.


Nicely done!

Which reminds me of the importance of teaching ‘economic literacy’ in high school.


OMG Roger, we keep graduating MORON’S that can’t do simple math!!!

I was at a store last week. The total come to $23.56. I gave the clerk $25.00. I always do the math real quick in my head to make sure they don’t short me. No, no shortage, instead he is handing me $4.50 in change!! I look at it bewildered trying to figure out, HOW IN THE HELL, did he come up with that. I mean you don’t have to be precise but should know that it would be no more than a dollar and some change, BUT WAIT it gets better. So I ask the clerk, did I give you $25.00? Yes he replied. I asked is the amount $23.56? Yes. So then I ask why did you give me $4.50? He replied to me, is that to much?? OMG!! I could have told him anything. I could have kept it and STUPID wouldn’t have got it. I told him, as I figured he would never figure it out, that the change is $1.44. He still stumbled about the register and finally gave me $1.40. I wasn’t going to try any more at this point, afraid that the poor idiot’s head would explode.


Oh and mind you this same crowd says they need more than minimum wage. If you can’t handle this WHY would anyone in business pay you more? You wasted your education and now you want society to pay?


Home run,BTDT…

As a fellow small business owner here in the once great state of CA, I too have the burden of rediculous and expensive fees and regulations to pass on to the customer. Anytime I break down the costs and show what percentage goes not to me but to thye state or feds they say it can’t be true…

And you nailed it on the enviromentalist mandates, everyone wants clean air and water, but no one thinks about why their gas really costs so much or why their water rates are going through the roof. It is the taxes, fees and regulations…


But it makes so many of us feel so good to think we’re saving the planet! What’s a little burden on anyone trying to achieve something? ;-/


(yes, that was sarcasm)


It’s funny Joe that most people WON’T care till it affects them. In my business I have been regulated to death, with new items and products that I must use in my job. Well of course all of those INCREASE the bottom line of what I charge. I have had customers see a quote for a job and think that most all of that is going to me. When I show them the breakdown in material costs and others, they are shocked to see that a lot of time, a good portion goes to all the B.S!!!

People love the touch feely of some bleeding heart program or gimic thinking big business will pay their way. WELL FOLKS cost ALWAYS trickle down to you the CONSUMER!!! That is why prices ALWAYS keep going up.

Take gas as an example. Californian’s want clean air. Fine. But when they see other states they wonder WHY do we pay more? Business is NOT going to give you a free ride because you want something. YOU PAY.

Now for the red thumb crowd that thinks it is all greed. Think about it. With all the stuff tacked on, if you don’t pass on, pretty soon there is no more profit and you are out of business. Simple as that.