CalSavers: 340,000 New Savers, and Counting

This week we have the pleasure together of chatting with Katie Selenski, Executive Director of CalSavers. Since 2017, Katie has been in charge of what has quickly become – and is likely to remain -- the nation’s largest Auto IRA program. While the successes are wonderful, the challenges are also very real. We spoke in mid August, so don’t miss our Post Script and some important new news at the end of this piece.

Katie, CalSavers just passed its third deadline – this one for employers with five or more employees, and no retirement plan.  Give us an update.

Yes, it was so exciting. In a nutshell, we just crushed our expectations. We doubled the number of employers from 50,000 to 100,000 just in those last six weeks, which was thrilling and exhausting and really gratifying. As you know, there’s a lag between when employers come in and when we see saver-funded accounts. We’re just now starting to see the surge beginning and our savers’ money flowing in. This is what we’ve been waiting for.

The press around the program has been positive, and very focused on awareness, making sure employers know this is real and what needs to be done.

When I think about press, I think about two main categories: the national industry press, and in-state news. We, along with other states, have been very lucky over the last several years to get a pretty decent amount of coverage from the industry outlets.

This year we’ve been focused on driving more local news coverage so that employers know what they need to be doing to comply and avoid penalties. We also want workers to know what's coming as they're deciding whether or not to become savers.

It's taken a lot of effort to get to this point, Katie. What are you glad you have done?

There are so many things. I'm just so proud of our collective team - both our staff here in Sacramento and our partners, especially at Ascensus. I’ll share a few highlights.

Along with Ascensus, we launched a public live and interactive webinar series.  We found that employers really appreciate the access to that kind of support without having to travel or be a member of a Chamber of Commerce.

We offer seven to eight free public webinars every week for both employers and employees. Since last year we’ve had over 1,000 attendees each month, which surged to 3,000 in June. We also have a recorded version on our website that anyone can access at any time. It's a wonderful collaboration between our staff and our partners at Ascensus.

Other things we're proud to have done -- enforcement with patience and grace has been very impactful. There’s really no replacement for giving employers some time, especially during the fall out of a global pandemic and considering it’s a brand new program with a modest marketing budget. All of our advertising is digital and we understand we’re competing for the attention of employers, so there’s not always a lot of awareness of the program.

For each wave, we have a fairly generous time period where we’re sending increasingly firm follow-up messages. Ultimately, we send enforcement notices, and then penalty collection notices. I’m pleased to report that those notices are very effective, and we haven’t collected a penny of penalty revenue. The goal is to inspire people into compliance.

One more thing I’m proud of is our multilingual approach to this work. Being such a big, wonderfully diverse state, it's really important to us to invest in having broad and deep multilingual accessibility. Right now our website and most of our materials are available in ten languages. We’re increasing it to 15 soon. The call center, to the credit of the Ascensus, services calls in more than 40 languages.

Tell us about some of your bigger challenges, and what’s useful for peer states to know?

Yes. Well, the volumes. Anytime you have 92% of your universe of volume having a deadline on the same day, that's just going to pose challenges.

The legislature defined these deadlines in statute. They are easy to understand, but it turned out to cover 4% of the employer volume in year one, 4% in year two, and then 92% of the volume this year. It was challenging. I've said to my friends and colleagues in other states as they're thinking about design, maybe don't do what we did on that.

I've said to folks, do not set your deadlines until you have your hands on the data. You need to understand the distribution of employers by size before you set those deadlines. And then you can do it more efficiently than we did.

We also learned that you don't need three years to roll out -- or three and a half years in California with our six-month pilot. You can both organize your employers more evenly, and space your waves closer together.

Our volumes posed challenges at the call center and on the website at certain brief moments in the days leading up to the big deadline on June 30th. We got through it and, to our partner’s credit, they navigated well and made some pretty quick pivots in that last week. By July 1, we were back down to essentially no hold time. We continue to bring on employers and savers in a smooth fashion.

What do you think your biggest focus areas will be in the coming year?

Our strategic plan over the next two years will be shifting focus to more saver education and outreach. We're also balancing the risk of potentially losing some people when we engage more.

It might sound contradictory, but hear me out. The beauty of our automatic enrollment, nudge-based programs is that folks can be as passive as they want to be and that really works for them. But when we start doing more engagement, we expect to see some level of folks thinking about us more and, therefore, some of them are going to decide they want to opt out. 

And, before we get to 2023, we have another employer deadline on December 31, 2022.

From this point forward every year on December 31st, there's a deadline for newly covered employers. These are employers that are either new in business or new to the threshold (5+ at the time of this conversation). Because we’re a big state, that’s 25,000 employers who will have a deadline this December.

We are working to make sure we go through all the same processes we used for initial program rollout. These include following up to ensure awareness and engagement, and beginning enforcement notification if needed, and supporting employers to bring them into compliance, which will be a massive undertaking. Our top focus for a while will be employer onboarding and getting through program rollout.

You’re examining an interesting question - what are the right ways to engage in an auto enroll environment? Over time, you want your savers to be connected to their assets and making informed decisions.

Or just getting the emotional benefits and confidence of being more connected to having a plan for the future, and assets for the future. Studies show that just having a college savings account, even if it's not well funded, increases your odds of going to college. There may also be a similar secondary benefit of being the owner of a retirement account.

As for investment decisions, we're not terribly concerned with people changing their investments - it's more expanding their view of their personal financial lives.

We have some pretty basic resources on our website for financial wellness and that we'll continue to expand there. We’re still designing what that's going to look like, but it's exciting because we're here to serve our savers.

Also, we plan to bring in some experts to help educate us and the board on potential options for lifetime income. There's just so much good research and innovation going on in that space. We don’t have anything major coming anytime soon on policy change, but it's in our plan to at least educate ourselves and start talking about it.

As you know, we’re currently working on a bill that would expand our program substantially. We'll know soon if it's going to get through the legislative process and get the governor's signature and we’re very grateful for Treasurer Ma’s leadership on this, especially in identifying our legislative champion Senator Dave Cortese.

The bill would lower our threshold for mandated employers from five employees or more, to one non-owner employee or more and allow us to fulfill our mission to ensure all Californians have a path to financial security in retirement. If successful, the deadline for these employers wouldn't be until December 2025.

Another reason we pushed for this bill is that we have demand for it in the micro business segment of California’s of employer population and it’ll help simplify compliance for small employers whose size fluctuates around the current threshold year to year.

About how many affected workers do you think this would cover in California?

Our estimate based on last year’s data is about 300,000 employers, employing about 750,000 people. 

Wow. Shifting directions: the state programs seem to be gaining broader acceptance. What's your take on how they fit into the future retirement savings ecosystem?

I think what we're seeing is that these state public programs - including CalSavers - can sit alongside innovation and the more assertive efforts we are seeing on the private plan side to expand coverage and provide good access to retirement saving at work. In the data we’re seeing that the innovation and expansion of the private plans is happening alongside and in a complimentary way to the emergence of these state programs.

I’ll give you some numbers on our employer response to-date to illustrate what I mean. Overall, more than 85% of the employers we communicated to in Waves 1-3—about  245,000 total—have responded to our notices so far. Almost exactly half of them have registered to facilitate CalSavers and the other half told us that they offer a plan. Some of those employers have longstanding plans that we just had no way of knowing about because they weren’t contained in the public federal database.

But many of them have newly established plans where the CalSavers compliance deadline was a catalyst that moved those employers into decision mode.

Those employers starting plans are responding to private sector product and marketing innovation that we observe every day, and that's great.

We’re mission driven - we want to see more people get access to and hopefully participate in retirement plans and services. That's happening through our program and through new private plan formation. We know that not all employers are going to be able to establish a plan, so, unless there's another national level policy effort, I think there is always going to be a need for these kinds of public options that are free for employers.

We're going to continue to innovate and fine tune our product and our program, first for the benefit of savers, of course, but also to make it an easier experience for employers.

What are your thoughts on some of the federal proposals to expand coverage, including to states who may never establish an Auto IRA program?

I certainly appreciate that there are lots of ideas percolating out there, and the attention to the retirement savings gap. I think that the most aggressive proposal we've seen was the Build Back Better retirement section including a national standard, potentially with state programs fitting into the national solution.

I personally am very supportive of that and think it would have made a big difference, even though we knew that that might not have the greatest chance of going all the way. We focus on what's in the best interest of our savers in California. And we can appreciate that folks in other states might like to have this sort of coverage too.

POST SCRIPT. On Friday, August 26, Governor Newsom did indeed sign the CalSavers Expansion Bill sponsored by State Treasurer Fiona Ma and authored by Senator Dave Cortese.

Katie, thank you for your perspective and insights. We couldn’t be more pleased with CalSavers’ success and impact.

Katie Selenski is the inaugural Executive Director of CalSavers, the State of California’s pioneering retirement savings program for the millions of Californians who lack access to a retirement plan at work. Appointed by the State Treasurer in 2017 shortly after legislative passage, Ms. Selenski took CalSavers through design, build, launch, and growth.

Prior to taking the helm at CalSavers, Ms. Selenski was the State Policy Director for pension policy at The Pew Charitable Trusts in Washington, D.C., where she advised policymakers in a dozen states and cities.  Previously, she was a senior manager with the nonpartisan public sector consulting firm Harvey M. Rose Associates, based in San Francisco, where she served municipal leaders on a wide array of budget and management matters, including pensions. Earlier, she was a municipal bond rating analyst at a leading rating agency, a legislative aide in the California Assembly, and the director of an historic non-partisan statewide youth voter turnout initiative.

For her stewardship of CalSavers, Ms. Selenski was awarded the inaugural Best of the States Spotlight Award by Georgetown University’s Center for Retirement Initiatives in 2022. She is a member of the advisory board of the Aspen Institute’s Leadership Forum on Retirement Savings and a frequent speaker on retirement savings and has been quoted by dozens of national media outlets. She is a graduate of the University of Chicago and the John F. Kennedy School of Government at Harvard University.

This piece was featured in the September 8, 2022, edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.