Four Innovations and Rollout Reality: Maryland$aves at ground zero

What’s special about Maryland$aves? Lots of things! We had a chance to catch up with program board chair, the Honorable Josh Gotbaum and executive director Glenn Simmons as the program is going live - about four innovations and the realities of rolling out a new statewide program. Read on for the inside scoop.

Any introduction of these two runs the risk of under-representing the depth and breadth of their experience in the public and private sectors. We first met the Honorable Josh Gotbaum through our work on the OregonSaves program and while Maryland was completing the legislation that would enable it to provide expanded workplaces savings coverage. We enjoyed many (robust!) peer conversations about this interesting new space and how it might work. We met Glenn Simmons when he joined Maryland focused on the launch of Maryland$aves, with an emphasis on communication and steady engagement.

Josh Gotbaum, you've been involved in the Auto IRA community since its early beginnings. What do you like about what you see today?

Josh:  There's lots to like.  First,  programs are now actually up and running here, providing an important new workplace savings option to millions of people who haven’t had one before. I also like the fact that we overcame the Department of Labor's initial resistance to the idea so that they became supporters instead of opponents. And I very much like the fact that we're learning from the early states -- thank you, Lisa, and Courtney and Katie – about what sorts of improvements to make in the states that follow, like Maryland.

Glenn Simmons, you're leading the program's day to day operations. Let's start with the latest news from Maryland Saves.

Glenn:  The big news is we are holding our pilot program participant onboarding session tomorrow at 10 o'clock. (This interview was conducted the week of May 9, 2022). We have 31 business owners committed to participate in our pilot. We want to make sure we have as many counties in the state as possible represented. Word of mouth is the best way to get people to enroll. And we want to make sure people from all over the state have a chance to have a good experience with us.

That's exciting. Over the recent months, you've selected your provider, you've completed the investment lineup for the program. You're working on preparing for launch, you're now in pilot phase and statewide launch is targeted for September. Is that right?

Glenn:  Yes. There’s a flurry of activity right now about getting all the final elements, including documentation, in order. So at the committee level we have been very busy and our board member ERISA expert Paul Green has been just a joy to deal with. We're very lucky to have him and people like Josh Gotbaum, and other real experts in this space on our board. There are some complexities in standing up these programs. And I think our board is well organized in that regard.

Thank you! Let's talk about the transition from pilot to your statewide “go live” in September -- how do you see that shaping up.

Glenn:  I can tell you our outreach will continue, and in fact will step up. We expect to be working with our partners Vestwell and AARP to get some PR activity going, including earned media and perhaps some paid digital advertising. We will be working to get the name of the program out there and generate some excitement -- all toward the launch in September. Our marketing plan is becoming more granular every day. We have some specific ideas for reaching out to a number of our minority communities to increase awareness and participation.

Josh:  One way Maryland really is different is that we actually have to convince employers to sign up.  Our marketing is not a legal notice, “Dear employer, you are required under law to sign up with X, Y, Z Saves”. And so Glenn and his colleagues and our partners are being creative, focusing on the benefits to employers that they and their employees get from signing up.

Glenn:  That will include active promotion of the $300 annual corporate report filing fee waiver. This year’s timing is important. Because we're launching in September, employers will have three months to qualify for the 2022 waiver. And we're thinking that that might help us front load some enrollment this year.

Josh, you're an innovator. What are some of the unique features of the Maryland Saves program?

Josh:  I'd say there are four. One, Maryland is the first state to provide an incentive for employers to sign up rather than a penalty for not doing so. In order to get solid bipartisan support, we needed to go with a carrot, not a stick. Second, I think we're going to be the first state to have a real emergency savings program, so that people will be less likely to raid their retirement when they have, for example, a doctor bill for their kids. Third, I think we're going to be the first private retirement account to actually help people get a larger Social Security payment by offering to accelerate their Maryland$aves payout so they can delay claiming Social Security. That's a big one. It's a priority promoted by Kathleen Kennedy Townsend. And last, we are going to be the first state to convert retirement savings into a monthly paycheck at retirement automatically and by default.

Can we talk about emergency savings – what will this look like in the Maryland$aves program?

Josh:  The most important thing about is that it is going to be assets that are separately identified and named as Emergency Savings.

A note about the history here. Most of the states that started out, for entirely understandable reasons, provided a money market account for savers’ first contributions. It was intended to serve as a “safety cushion” to make sure that when the market goes down, people don't lose money.  Unfortunately, that idea got expensive because interest rates went to zero, so all of a sudden states had to pay the money market fund’s investment fees themselves in order to keep the return on the money market fund from being negative.

We got the benefit of learning from that experience. We went out and found financial providers, in this case Lincoln Financial, that would provide a stable value product so that our cash equivalent fund has a minimum interest payment to savers that is higher than money market funds offer. It’s currently paying one and three quarters percent. And that number will go up as interest rates go up.

In this way we are following the architecture that was actually recommended by David John of AARP. This is: you put some money into an emergency savings account; when you've reached a certain threshold amount, at that point money goes into your retirement account.

Glenn:  There was a debate about the “right amount” of automatic emergency savings -- $500, or $1,000. The data showed us that $1,000 is a better place to be. So unless they make a different decision, our participants will be contributing $1,000 to emergency savings, and the balance to retirement savings.

Glenn, do you expect that this will be taking place within the Roth structure?

Glenn:  Yes.

That’s a useful technical note. Sticking to operations, we need some unvarnished truth. What are some of the more challenging elements associated with launching an Auto IRA program?

Glenn:  This is a big picture answer to that question, but I am completely amazed at what it takes to start a very simple program, and everything that goes along with it. We’ve got a range of intersecting and adjacent jurisdictions --  IRS regulations, the DOL regulations, state laws, federal laws, and DOJ interpretation. It truly takes a set of very smart people to navigate. I’ll say Thank You to David John and Mark Iwry for the work they did to carve out this pathway.

Once we have the program designed, the next challenge is communicating it in a way that's effective and simple and easy.  

You know, people can go down to their local bank and open a Roth IRA, but they don't because it's so confusing. It's complex. It's intimidating. Our job is to simplify that and make people feel comfortable, to understand that this is easy and they can get started today

Josh:  In the name of “helping people”, we've made the traditional retirement system so complex that it's next to impossible for most employers be confident that they're not running afoul of some regulation. That's part of the reason why MarylandSaves is taking the fiduciary responsibility on ourselves. What we're saying to employers is, ”You don't have to worry about 12,000 regulations. You don't have to worry about being a fiduciary. We'll be the fiduciary. We'll worry about and make sure that people are protected. You just have to sign them up and process their payroll.”

Josh, what's one thing you think people should know about the future of Auto IRAs in the US?

Josh: I think there are two. One -- what the state Auto IRAs are doing is showing that you can have smart, affordable, automatic savings programs without requiring employers to pay for them or to take on legal responsibility. Two, what the state Auto IRAs are also showing is you can have fiduciary protections without the employer being the fiduciary. I think that's important because we don't want a future in which people are not protected but we do want a future in which employers don't feel that it's too hard to deliver something to help their employees.

Glenn, what's one piece of wisdom you would share with states that are considering an Auto IRA program?

Glenn:  I would say be a good student. What I mean by that is, join the monthly state calls that the Georgetown group. You can also talk with the active states that are implementing programs. The cooperation amongst the state programs is phenomenal. We have, as Josh alluded to, learned so much from the states that have come before us because they share information. And I'd say they even go beyond sharing. They advise us on what not to do, and what to keep an eye out for.

Josh:  Lisa, we steal from your work all the time.

There you go.

Glenn:  It truly is a very collaborative space. I've learned so much, I've made personal friends with these people. I have a relationship with them. I can call them, email them with any question. And the feedback is always amazing. I've never worked in a space like this before. It is so amazingly refreshing.

What haven't we talked about that you guys would like to spend a minute on?

Josh:  I think the real important question is, where do things go from here? One is: what does it take for the states that are holding back -- largely those that don't want to use a mandate -- to think about setting up a program?

Secondly, we think we've just started in on the question of what's the right mix of offerings for this new group of covered savers. The people who don't have 401(k)s don't need 37 investment options, but they do need some options and they need options that make sense, are professionally managed and low cost.

Where we think there needs to be more innovation is in some of these areas where you see us trying new things. What happens when you retire? What happens when you have an emergency? How do you get people to have the flexibility to draw down when they need it, but not draw down so much that they withdraw from the program entirely?

We have lots of things we need to learn about how to make these programs really useful for the broadest set of people that need them.

Wow, we like your thinking. OK, it’s time for our final (fun) question. Glenn, when you get time away where do you like to go?

Glenn:  I did recently go to the Grand Canyon. It was a bucket list item. It was great. I had almost four full days where I disconnected from pretty much every electronic device and reconnected with nature in a landscape that was completely new to me. It was awesome.

That sounds fabulous. We can picture this. How about you, Josh?

Josh:  Our last getaway was to Bar Harbor, Maine where I sang with adult a cappella groups from all around the country as part of an annual gathering of a cappella groups. My wife Joyce showed me the Acadia National Park that she'd been visiting since she was a child in Montreal. Beautiful.

Thank you and Outro.

Want more? You can connect directly with Josh and Glenn via email here: Josh Gotbaum and Glenn Simmons. You can follow the Maryland$aves program here.

This piece was featured in the May 19, 2022, edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.