Are Greener Days Coming to Vermont?

How the Green Mountain State Is Working to Secure Better Retirements

Vermont State Treasurer Beth Pearce gives us the straight scoop.

Treasurer Pearce, Beth, tell us about your involvement in retirement security in Vermont. We know this is very important to you.

Well, for me it ties into one of the goals of the Treasurer's Office, which is to provide every person in Vermont an opportunity for financial well-being. You want it for yourself, you want it for your family. We want it for every single person in Vermont.

We approach financial well-being a number of different ways. We manage our public retirement plans for the state employees, teachers, and municipal employees. That covers about 60,000 active, vested, and retired members. We also manage supplemental savings programs, deferred compensation programs, and the like. We focus on financial literacy. And we’re starting the Green Mountain Secure Retirement Plan for employers and workers who have limited access today.

We know you've been looking at retirement readiness in Vermont, and that's brought you to where you are today. What are you learning?

We teamed up with AARP and they did a study that determined there were 104,000 employees in Vermont – 45% of our workforce -- that did not have access to retirement savings at work. You really do need that to succeed. Folks just don't put enough aside for savings any other way. You need something that's understandable that is readily available. We recognize that if you're trying to do it yourself, it can be confusing. Frequently in those cases, as we saw with the numbers, folks did not have the ability to access sufficient dollars for retirement. Social security is not going to cut it.

We have a very large proportion of folks that work for small businesses of less than 50 and even less than 10 people. Small businesses are the backbone of Vermont. And often they don’t feel they’re able or ready to stand up a retirement plan on their own, so their workers lack access.

We also know that in Vermont women make 82% as much as men do, and they live longer. If you have a lower salary that impacts your retirement, and if you live longer that’s not a good equation. So these broad numbers got us motivated to look more closely.

That review and those findings led you to take some action starting a couple years back.

Right. We looked at this in 2005 or 2006. My predecessor Jeb Spaulding and I looked at it. We attended a session at Dartmouth with Maine, New Hampshire and Vermont talking about these issues. At the time to be very candid, the investment community felt a little uneasy with some of the ideas that came forward. The investment community said, let's see if we can make some inroads into this retirement access issue. And frankly when we took a look at the numbers 10 years later, they were pretty much the same in terms of need.

Our investment community does great work. We're very proud of what they do. But there are retirement security gaps, primarily with small businesses. We saw ourselves as a way to fill that gap.

One of the things that's very important in the Treasurer's office is that we're not here to supplant or replace. We are here to add resources when there is a gap, and to have a good relationship with the private sector in the process.

So we created the Green Mountain Secure Retirement Plan with the help of the banking and investment community, and a lot of enthusiasm. It is for employers that have 50 or fewer employees, and that do not already have a plan in place. The plan is a state-based Multiple Employer Plan which will be launched in partnership with a private sector provider.

Tell us – what does it take to stand up a state-based MEP.

Our approach has been first to identify well-qualified providers by RFP, to establish servicing parameters, and to execute a contract. We are done with that process and the board will be approving the contract shortly.

We've had a little delay for two reasons. One there were some new Department of Labor regulations relating to state MEPs that came out in 2018, and we needed to get clarification on impact to our proposed program. We made some tweaks to the to the authorizing legislation as well in 2019 to provide us some design wiggle room if we needed it.

And now obviously with COVID-19 affecting all of us, it’s challenging us to think about how to work with our business community effectively.

Our goal will be to have a series of small meetings with businesses asking them, how do we approach the Plan rollout in this environment. We’ll look for a representative group from different constituencies. Because we don't want to wait until the pandemic is over. Employers and workers need this support now. How can we find an effective way to deliver services?

You’re right. This is an unusual time. Is it the wrong time to be approaching employers?

In Vermont, we have a very good relationship between our employers and our employees in small businesses. We also have a number of groups that have taken a very proactive approach toward working with employees and collaboration. VBSR - Vermont Businesses for Social Responsibility is one of these, as is Main Street Alliance and other groups. There is sensitivity to the fact that people are hurting. And people are hurting because they did not have a sufficient savings, that nest egg that you might need if you lose a position through no fault of your own. And folks recognize that this is a little tougher even than the great recession because of the uncertainty that's associated with this pandemic.

But we have an opportunity to address that issue. Yes, you're going to have some businesses say “not the time”, but I think we're going to find a lot of businesses in Vermont that are genuinely concerned about their employees and want to help. For them this is one opportunity. It is voluntary for employers to decide to join the plan, so it provides that choice. I think that it's going to be attractive nonetheless.

One thing that’s changed since you started is passage of the SECURE Act allowing for private sector MEPS and PEPs. What does this mean in Vermont?

Again, our goal would not be to compete with private sector providers. If they're focusing on the opportunity among employers that have 50 or more employees, that’s terrific. We're focusing on the under-50-employees segment that is a gap today. And we're going to continue to do that. We have a service that's attractive, we've worked very hard to keep the costs down and to provide a good range of investments.

We know that those closer to retirement will need stable investments. And younger folks coming into the market can take a bit more volatility. We want to provide both opportunities. We also want the plan to be turnkey and simple. It’s true that “less is more” in this case. If you have 15 different investment options, you take a look at the list and say, I'll do this later. And then you never do it. Simple matters.

This is also why financial literacy is important.

Tell us more about what you're doing in the financial literacy space - it’s such a hot topic.

We've got it from kindergarten all the way up through your golden years. We have a program called “Reading is an Investment” in which over 130 schools participate. About 5,000 children finish the program each year, and another 7,000 or more are involved with it during the year. The program offers prizes -- 529 scholarships -- so that the folks have an opportunity to start an account for college or post-secondary education.

We wanted to reach more kids, including those whose parents are less able to help them at home. So we’ve just started an after school curriculum. We were able to do 12 programs across the state in the first year, and then we doubled it this past year. So we're trying to reach a more diverse population in the process.

We also support programs with new Americans where we work with them toward starting a business or buying a house. We have worked with a couple of the agencies to assist in that. And our retirement division provides counselling sessions for members that are about to retire. And we combine that with social security and other types of financial information.

We are linking our financial literacy initiatives to the Green Mountain Secure Retirement Plan too. Our goal will be to have our financial literacy director working hand in hand with the company that will be doing a lot of the work to enroll folks. We want to combine enrollment activity with a financial literacy component.

You mentioned you've selected a vendor and are close to completing your contract.

Yes, we’ve completed the contract. It’s going through some pro forma steps with the Secretary of Administration and our agency of digital services as all state contracts like this for new projects do. When that step is complete, we are going to convene the board to put a bow on it and finish the process. At that point we’ll also start to focus on implementation and how we're going to work with these small groups to sound out the issues. We need their input.

Here’s one example. We had a series of public hearings when we started the process. Our first thought was to set up the plan without any employer contribution in the first year. We intended to add the feature down the road after employers were more familiar with the plan. In one of our public hearings, a large number of business folks said, no, we want the option of being able to contribute right away.

That was something that if you had asked me, I would have said that's probably too much to ask the first year. Those employers were all in and they wanted their option.

And so we want the businesses and their employees to help us get it off the ground and make sure that that the delivery system meets their needs. This is why we're doing small groups to have that conversation. Because the owner of a cafe is going to know more than I will about how to present it to his or her employees. They’ll know what their needs are in this process and what the financial literacy needs might be.

We know your office is busy - What do you see next for Vermont in this very interesting time frame?

We believe everyone should have an opportunity for financial well-being. So we’ve got to look past COVID and continue focusing on the important elements and working achieve them. Whether it's housing assistance, whether it's affordable housing, whether it's more financial literacy, whether it's healthcare, we have to address all of those issues. Even though we have to concentrate on the immediate, we should not lose sight of the future.

Thank you Treasurer Beth! If people want to stay close to your process, what's the best way?

We’d love that. There are several great ways. You’ll find good information on our Treasury page for retirement security. After the upcoming board meeting, there should be a formal update on the site. If folks want to stay close to the process and reach out they can certainly contact us directly. Interested employers should contact us as well – we keep a running list in order to stay well connected.

This piece was featured in July 29, 2020 edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.