In a classical free-market economy, an employer sets compensation and benefits policies in order to attract and retain talented employees, while ensuring employee-related costs allow the company to compete in the marketplace.

At the same time, employers must comply with more and more mandated benefits. Certainly, some safeguards are necessary; workers compensation, for example, protects employees in the event of a work-related injury.

A seminal event for benefits occurred in 1935 when President Roosevelt signed into law the Social Security Act, which called for a mandatory employer and employee payroll tax unless the employer was classified as exempt. In the 80 or so years since, myriad federal- and state-mandated employment laws and regulations have been enacted—most recently, the Affordable Care Act (ACA), the Department of Labor (DOL) overtime rule and federal, state and local minimum wage thresholds.

On Sept. 29, California Gov. Jerry Brown signed into law a bill creating state-sponsored retirement plans for an estimated 6.8 million Californians whose employers do not offer one. California is the eighth and largest state to adopt a program like this.

Beginning Jan. 1, 2017 and phased in over three years, the California law requires private-sector companies that have five or more employees and don’t provide a retirement plan to deduct contributions from employee paychecks and place them into retirement accounts, before or after taxes. Unlike some other state-run programs, California’s law requires employers to enroll employees at a contribution level of 3% of pay, unless the employee opts out of the plan.

Some critics of this type of legislation argue that plenty of investment firms, like Fidelity and Vanguard, offer direct EFT transfers of an employee’s savings account into an IRA. They argue that such mandates are a solution in search of a problem—that is, unless the long-term strategy of the legislation is an employer-mandated contribution or the opportunity for the state to become more involved on the investment side of the program. The DOL has stated that state-run retirement programs, including a 401(k) plan, will not be subject to the Employee Retirement Income Security Act of 1974, unlike private sector 401(k) plans.

Depending on the size of an employer’s workforce and where it has locations, it must comply with a variety of benefits laws, which complicates the process of growing employee count or adding locations. California must wait and see whether the legislation will solve anything. Not to mention, will these programs encourage employment, or do just the opposite?

More than ever, employers are looking to their advisers, including independent insurance agents, for guidance about how to thrive in a competitive marketplace.

Dave Evans is a certified financial planner and an IA contributor.