PLANADVISER - July/August 2022 - 23

M
STATE PLANS AIM TO FILL THE GAP
The program,
aria, a janitor in the San
Francisco Bay Area, had been
working in her industry for
two decades without access to a retirement
savings plan. A couple of years
ago, she was enrolled in a program
offered by the state of California
through her employer, Janico Building
Services, in North Highlands, California.
" Maria came to her manager
and was ecstatic, " says Lorenzo Harris,
president of the company.
The program, CalSavers, was
designed to reach employees such as
Maria-people without access to a
401(k) or similar plan through their
employer. By some estimates, 57
million workers in the U.S. have no
access to a retirement plan, at work.
In recent years, 13 states, according
to ADP, have enacted retirement
savings programs to help individuals
defer some of their earnings for
retirement. The rules of these statemandated
programs vary greatly from
one to another, but they could help
bridge the retirement gap for as many
as 41 million uncovered U.S. workers.
When she was enrolled, Maria
had worked for Janico for some time
but had no retirement savings plan
because her employer, like many
small companies in California,
thought they were too expensive. That
changed when Janico became the
first company to enroll in the California
program, which offers automatic,
portable individual retirement
accounts via the employer.
Initially, Harris says, he viewed the
program as a " typical " government
mandate-in other words, a burden.
" California is notorious for creating
legislation that favors employees over
employers, " Harris says. But he later
came to see it as a good thing-not
only for his employees, but also for
his company. Looking back, he says,
the program has helped him with
recruiting and was easy to implement.
In early July, about a week after a
key enrollment deadline, CalSavers met
a remarkable milestone: It moved from
CalSavers, was
designed to reach
employees such
as Maria-people
without access to
a 401(k) or similar
plan through their
employer.
having enrolled one company-Janico,
in November 2018-to passing the
mark of 100,000 enrolled employers.
That number represents a steep rise
from the 38,000 enrolled employers at
the beginning of this year's second
quarter, says CalSavers Executive
Director Katie Selenski. At the time of
writing, CalSavers had over 283,000
funded accounts and $232 million
in total assets. The average monthly
contribution per saver was $164.
" We are a little tired from the rush
but thrilled with the response, " says
Selenski. " Employers have just been
pouring in. Our teammates working
on the phone are working overtime to
meet the need. "
At the end of the June 30 deadline
day, by which the final wave of companies
should have registered, CalSavers
had a 77% response rate, up from a
61% response rate at the end of the last
wave, Selenski says.
" Employers are saying that
enrolling was not as difficult as
they'd expected. In general, I think
they're glad to have a way to facilitate
their employees' access to retirement
savings at no cost to themselves, " she
says.
California mandates that companies
with at least five California
employees be registered for the
program if they have no 401(k) or other
retirement plan type that exempts
them or face fines.
Implementation of the program
has had another positive effect: 98,000
employers had reported an exemption
because they had either launched a
private plan or reported their existing
plan for the first time. " This number
tells you there are many employers
that are choosing a private option, "
Selenski says.
Others, too, have noted how the
private sector is responding. Selenski
applauds what has been going on in
the private sector as a result of California's
mandate. " We think the expansion
in private coverage is great, and
we're encouraged to see the innovation
on the private-product side. "
Scott Parry is a senior vice president
at Ascensus, the company
that administered Oregon's plan.
Ascensus now operates CalSavers'
plan, along with the plan in Illinois.
" For one program, CalSavers has had
a phenomenal impact on retirement
savings, " Parry says.
Ascensus, which had built technology
to manage 529 college-savings
plans, took that technology and
rebuilt it to work with the rules of
state automatic-IRA programs. " We
built a system that allows states to
be in compliance with the legislative
mandates while being low-cost and
scalable, " Parry says.
Of the employees enrolled in
CalSavers under the state's mandate,
the opt-out rate during the first
30-day period is about 25%, Selenski
says. Then it goes up about 10% after
enrollment, when people's circumstances
change or they change their
minds about participating, to a total
of 35% opting out.
" We are impressed by these rates
when you consider the cash-flow
needs of participants who have an
average income of less than $30,000
a year and the fact that they're not
getting a match or incentive, " Selenski
says. -Rhea Wessel
planadviser.com July-August 2022 | 23
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PLANADVISER - July/August 2022

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