Grant’s Go-To’s: School’s Back in Session – How states share “Lessons Learned”

When I read laws and legislative proposals related to state-facilitated retirement savings programs (SFRPs), I’m often struck by the similarity in language from state to state. I sometimes experience a tinge of nostalgia when I happen upon a version of a sentence or phrase I remember discussing in meetings in and around the Capitol here in Sacramento nearly a decade ago.

If you toss some combination of the words “simplicity,” “ease of administration” and “employer” into a search engine, the results will yield provisions from several states’ laws or bills that specify program design considerations and the intent to make the programs as easy as possible for participating employers.

Proposals in Ohio and Rhode Island used the version that made its way into California’s law: “…with simplicity, ease of administration for participating employers, and portability of benefits.”

States such as Colorado, Illinois, Massachusetts, Mississippi, Missouri, New York and New Jersey emphasize maximizing simplicity not only for employers, but for workers as well with the following language: “…maximizes simplicity, including ease of administration for participating employers and enrollees.”

I could go on, but I won’t because my (perhaps rather obvious) point is simply that the states are all learning from one another and looking to each other for guidance. I think that’s a good thing. Why try to invent from whole cloth something that has already been forged through trial and error by others?

During the early days, when the CalSavers team was working on its feasibility study and drafting authorizing legislation, we were at a bit of a disadvantage. There were no existing models from which to borrow. But we were fortunate to have a network of colleagues in other states working on similar initiatives we could look to for ideas and inspiration. And there is photographic evidence to prove it!

The photograph above was taken at a Georgetown Center for Retirement Initiatives meeting in December of 2015 titled “States and Stakeholders Discussion on DOL’s Proposed Rule and Guidance.” That’s me at the end of the table along with (from L to R) Courtney Eccles from Illinois, Lisa Massena from Oregon, and Christina Elliot, my colleague from California. Also at the table that day were representatives from Connecticut, Maryland, New York City and the State of Washington. We were there to learn from experts and stakeholders as well as from each other.

With many more states working on SFRPs in various stages of development, including some with several years of operational experience under their belts, I have to imagine there are more place to turn for guidance these days, and that the “lessons learned” have become more robust, particularly when it comes thing like the nuts and bolts of setting up a record keeping and data sharing system that works well for employers.

States designing their programs can survey the landscape of automatic enrollment/escalation features of existing SFRPS and ask officials in other states how they arrived at their design decisions. Similarly, there’s no need to start from scratch when considering decisions about investment options. Auto-IRA programs appear to have landed fairly uniformly on Roth-IRAs with target date funds.

Are you wondering what the start-up costs for state-facilitated retirement savings programs are? It’s now possible to examine projections developed by other states and the experience thus far of programs that are already up and running.

States might also look to Illinois and New York for lessons learned about the challenges of going back to the Legislature to ask for a “do-over.” Both states have been engaged in two-year efforts to make changes to expand their programs and increase participation.

In Illinois, HB 117, which was recently signed by the Governor, lowers the threshold for employer participation from those with 25 or more employees to those with 5 or more. It also establishes automatic escalation of employee contributions. New York’s AB 3213, which is awaiting a signature from the Governor, makes participation mandatory for eligible employers and establishes automatic enrollment for employees.

In the weeks ahead, I thought it might be interesting to begin reaching out to the folks working on SFRPs across the country to ask about the most valuable lessons they’ve learned from other states, and about the lessons they would most like to share with others following in their footsteps. I’ll share what I learn.

Stay tuned. — Grant

This piece was featured in the August 26, 2021 edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.