Common Wealth for the Commonwealth: Increasing Savings Accessibility in Virginia

We met Mary Morris when a retirement savings program was still a twinkle in Virginia’s eye. Now, under her leadership, the state is moving steadily forward with a program that could cover more than 1.2 million workers who until now have not had payroll-based access to retirement savings. As CEO of the nation’s largest 529 College Savings Plan, Virginia529, Mary directs and manages the operations, resources, and investments of the Invest529® program. Additionally, she oversees all operations for ABLEnow®, the leading independent ABLE savings program in the country, while serving as a national thought leader and policy advocate for the education and disability savings industries.

Mary Morris, you are the CEO of Virginia529, and now responsible for the state's newly approved Auto IRA program. Tell us what got you into this savings business.

That's a long and winding trail! I ended up with a tax degree -- a Master of Law in Taxation -- out of law school. I’ve always been on the finance side of things. I did public finance bond work, and private practice tax law. Along the way, l also worked in education and on education issues. I've taught at different times at the college level. I was in the Attorney General's office when the Virginia College Savings Plan, now commonly referred to as Virginia529 and originally named the Virginia Higher Education Tuition Trust Fund, was created. They became a client because the state Treasury, Tax Department and all the finance agencies were my clients.

I helped build the program initially, then spent a term as Treasurer of Virginia. At Treasury I served on the Virginia529 Board and had the opportunity to focus on financing for higher education. I’ve always followed Virginia529. Fourteen years ago, I had the opportunity to come back in as the CEO at Virginia529 – a role that pulled together many of my experiences in the public and private sector and enabled me to focus on enhancing the accessibility and affordability of higher education.

You’ve overseen some changes during your tenure.

Yes -- in more recent years, our mandate has expanded within Virginia529. We added a disability savings component when Virginia’s ABLE -- Achieving a Better Life Experience -- program launched in 2016. First approved at the federal level, ABLE plans have been implemented by almost every state now. In Virginia, the program is administered by Virginia529.

Our experience in working with the public, doing outreach, and understanding how to help individuals and families plan and save for the future, has expanded. We’ve followed the whole private retirement concept for many years as the idea has been considered and studied in Virginia.

We recall that Virginia spent a few years evaluating this concept. What made the difference in 2021?

We did an in-depth study last year that really moved the concept forward. If the state wanted to add a private retirement initiative, we suggested several ways to do it effectively. Ultimately, Virginia529 was directed to establish the program because of our interest and background in successfully running other savings programs.

Now we're laying the foundation to offer a portfolio of education, disability and retirement savings programs. We’re still called Virginia529 (for a little bit longer!) – but we have become an agency that really seeks to help all Virginians plan and achieve financial goals.

Tell us more about your study. What did you learn during that process?

Oh gosh, we learned a lot. We learned more about the savings gap -- not just for Virginians, but across the country. I was struck by how similar the statistics are state to state. Virginia is different from all 49 other states -- our demographics, the mix of urban, rural, suburban -- and yet the savings gap numbers are remarkably consistent.

We see the same 45 to 50% of working individuals that don't have access to a retirement option through their employers. We also know state by state that the vast majority of individuals who save for retirement do it through their employer. So those gap numbers are pretty remarkable. As we move forward, we’re hoping the adoption numbers in Virginia will be consistent with what the first states have seen for their Auto IRA programs.

We also learned more about our ability to make a real difference in retirement outcomes. We completed a “cost of doing nothing” study and the data out of that was just striking. The fifteen-year cost to the Commonwealth of leaving this issue unaddressed was nearly $12 billion. On the other hand, if we provide more workplace-based access to retirement savings, relatively small savers’ contributions over a long period of time will close the retirement savings gap. And that was pretty remarkable to me.

We saw that even for those who might get into this program later in their careers, saving for just five or ten years can make a huge difference, by delaying the need to collect Social Security, thereby increasing monthly income for life.

So, we see the ability to make a meaningful difference in the short term. And over the long term to truly have transformational change for almost half the workforce in Virginia. It's compelling and it makes this whole project exciting.

You're moving steadily forward to implement the new legislation. Tell us about your priorities going into 2022.

2022 is almost here! While we are talking, I’ll take a moment to introduce Peter Thompson, our new retirement program director. Peter joined us in September after working with the Virginia Retirement System on their defined contribution plans for a number of years. He has private sector experience and he has worked with retirement program administrators. He brings expertise we did not yet have in house. Having Peter with us, I can't tell you how great that is.

We are fortunate that we have an in-house team with experience in all aspects of program development and implementation, from investments to education and outreach to account administration. Hopefully, this gives us a jump start relative to other state agencies that have tackled this. We have a strong marketing and communications team and a really good understanding of the demographics of Virginia, of our employers and employees, and we think that's going to help as we move forward.

We've also formed a program advisory committee. They met for the first time last October. We’re fortunate to have a lot of talent on that committee. We have individuals who have a background in employee benefits generally, and defined contribution plans in particular. Several of our Virginia529 board members also have experience in related areas and a real interest in moving this forward. So that's exciting.

Inside our team we have that legal background to do the legislative part, the rulemaking, to work with other state agencies to help us implement by getting us the information that we need, including data sharing agreements and things like that. Getting our team set was a first priority. We feel like we've got all the pieces and now we have to put it all together to hit our scheduled launch on or before July 1, 2023.

What do you think that will look like?

In early 2022 we'll finalize our program design elements. We'll issue an RFP for a program administrator. Our program advisory committee will work with our in-house investment team and investment advisory committee to make recommendations to the board about our investment lineup, our investment manager or managers, and our default portfolio. We’ll look at both Roth and traditional IRA options.

And then we are thinking about outreach. We know how important that is. As we are working on program infrastructure, we'll also be doing outreach to employers and employees to let them know this is coming. Our goal will be to build awareness and excitement.

We'll also work with the General Assembly during the session in early 2022 to give them more information about our plans. This legislation moved really fast in 2021. Virginia legislation always does. We have either a 45-day or a 60-day session, and our legislators are in and then they are out and that's it. After our study, the legislation was drafted in December 2020. It was considered in January and February 2021, it went through a few twists and turns, was approved, and we were off to the races.

That means that over time the legislators need to continue to learn about program elements so that they can fully support the program as it launches and grows. Having initial support for the concept of a retirement savings option for most all Virginia employees was critical. Now we have to grow that support and understanding of the key elements of a successful program – first with the legislature and later to the broader population in Virginia, to know what this is, why it's important, how we're going to try to do it, and to allay any concerns that this will be cumbersome, or costly or burdensome to employers.

We want them to see that it's going to be a positive, and a net benefit for employees across the Commonwealth. The selected format removes fiduciary responsibility from our employers. We think employers are going to like this new program because their employees are going to like it.

Love that.

So all of that charm campaign, you could call it, will be started in early to mid-2022. And we move forward from there. We’ll start to figure out a program pilot, and more.

By the way, I have to take a moment to step back and thank everyone, you and everyone else that has worked on this to date. Oregon, California, Illinois: I cannot say enough nice things about what these leaders have done, how they've done it and how generous and collaborative they've been.

My promise will be that as we move forward, and once we have some experience under our belts, we'll do the same thing for the states that come after us because we could not have come so far, so fast without that assistance; we couldn't have gotten such a strong piece of legislation without knowing from those other states what's worked and what hasn't worked in their own legislation.

I know that several states have had to go back for amendments. We’ll still have some of those, but hopefully we've avoided some by tapping into the wealth of knowledge that's out there. We really appreciate all of the vendors, the third-party folks, the ones who are already running these programs. Their help, their assistance, their guidance has been invaluable.

Virginia is unique in that your office has a robust infrastructure already organized around college savings and ABLE. Tell us more about how you see retirement fitting into that infrastructure.

I love this question because retirement is going to be a really important piece of what we are doing overall. In fact, we're working on a new agency name. You know us as Virginia529. Our actual name is Virginia College Savings Plan, which isn't who we are anymore. This new savings program provides an opportunity to dig deep, think about who and what we are as an organization, and where we fit into the Commonwealth.

It’s an exciting opportunity for our entire organization to work across programs more collaboratively. We started with education savings, and then we added ABLE disability saving and that's still growing. With the addition of this third pillar, our agency’s mission will be more holistic and inclusive, improving financial wellness for all Virginians.

We've always focused on financial literacy. Now this is a way to do that more broadly. We will make resources and education available broadly for the citizens of the Commonwealth and beyond -- because our other programs do have a reach beyond Virginia.

We’re then in a position to say, if you're interested in education savings, well then here are our 529 programs. If you or someone in your family has a disability, then you may be interested in our ABLE savings program. And if you don't have a retirement option available at work, or you're a gig worker, or you're a sole proprietor, you may want to look at our state facilitated private retirement program.

You can look at these programs separately, or all together. I think offering these savings programs cohesively under one umbrella gives our agency a real opportunity to close gaps in financial wellness and prepare families for their future needs.

So we're really excited about that over the next couple of years.

That's terrific. We can't wait. Let's look 10 years down the road. What do you hope Virginia will have accomplished with the launch of its new retirement savings program?

We want to see that we will have really made a difference, a positive impact in people's lives. That's the whole goal. We’d like to see that the program is well accepted, and that employers and employees alike see this as a good thing in the state. And that honestly, it will create a pathway for employers to move from this program into something that they may want to sponsor themselves, where they actually can have higher contribution limits. This program can be a pipeline for employers to implement private sector plans when they are ready.

There will always be new employers coming along, and there will still be individuals who maybe don't have another option. And if they know that the state offers something that's cost effective, simple, easy to get into, and easy to understand, they will see that as a viable option for getting started.

We think this big-picture perspective can help those in the business and financial community who are skeptical about these programs to see that we can be a partner with them in a continuum of financial wellbeing. They're all about helping people and elevating success for everybody. That's not competition. We can work together to do that. And we see a future here in the Commonwealth where the savings environment is richer for everyone.

We talked before Halloween and you shared a bit about your family’s celebration.

My daughters are always doing something. I have a 30 and a 36-year-old daughter, and in our family, we love Halloween. So we do a lot of decorating. We had a new big dragon to put out on the lawn this year. We get a kick out of handing out the treats and enjoying everybody else's costumes.

Thank you and Outro.

Want more? Follow the development of Virginia’s retirement savings program on the web here. You can also connect with Mary on LinkedIn and Twitter.

This piece was featured in the December 2, 2021 edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.