State-facilitated automatic enrollment retirement program to help over seven million Californians without access to a workplace retirement plan save for the future
July 2, 2019 - SACRAMENTO – California State Treasurer Fiona Ma, chair of the California Secure Choice Retirement Savings Investment Board, joined Board Members, former senator 
Kevin de Leon, and other leaders on Monday to announce the official launch of the CalSavers Retirement Savings Program (CalSavers), the new state program designed to offer California workers a simple, portable, and low cost way to save for the future.
California was the first state in the country to enact legislation establishing a state-run automatic enrollment Individual Retirement Account (IRA) program in 2012, and follows Oregon and Illinois in implementation. CalSavers will be one of the largest U.S. retirement programs to date. The program, which brings a retirement savings option to employees who don’t currently have one through their employer, is simple to operate and has no cost to taxpayers.
The Worsening Retirement Savings Problem and the CalSavers Solution
There are 55 million Americans who are currently on their own when it comes to saving for retirement—seven and a half million in California alone. With nearly half of California workers on a trajectory to retire into economic hardship (defined as below twice the federal poverty rate), CalSavers is leading the charge to close this savings gap.
"With California’s size and diversity, this pioneering program represents a major milestone—for California and the entire nation," said California State Treasurer Fiona Ma. "Creating CalSavers solidifies our position as a leader in growing the national movement to help all Americans retire with dignity."
People are 15 times more likely to save for retirement if they have the tools to do so through their employer. However, an estimated two-hundred-fifty thousand to three hundred thousand employers in California do not offer a retirement savings program, for various reasons. The administrative responsibilities, fiduciary liability, and additional costs that come with providing an employer-sponsored plan are often cited as roadblocks.
"CalSavers addresses all three of these challenges head-on: it’s easy to facilitate, employers have no fiduciary liability, and there are no fees for employers. Employers are only responsible for providing us with their employee roster and then remitting employee payroll contributions each pay period," said CalSavers Executive Director Katie Selenski. "We take care of all the communication and interaction with employees about their accounts. We’ve designed this groundbreaking program to make the employer experience as seamless and simple as possible."
A Decade-Long Dream
The first piece of legislation that would eventually lead to CalSavers was introduced by then-Assemblymember Kevin de León in 2008. Later, as a state senator, de León introduced legislation (Senate Bills 1234 and 923) that provided the framework for the implementation of the CalSavers program. "No one who works every day to provide for themselves and their loved ones should be forced to retire into poverty. That’s why we fought Wall Street to create CalSavers, which will provide millions of Californians with a way to end their working years with dignity," de León said.
CalSavers is operated as a public-private partnership, with oversight by a nine-member public board chaired by the State Treasurer and management by a small staff based in Sacramento. In August 2018, Ascensus was selected to serve as program administrator due to their long track record and expertise administering retirement plans of all types, including other state-facilitated investment programs. The Board hired State Street Global Advisors to serve as investment manager for the initial offering of four funds for the pilot and subsequently hired Newton Investment Management to provide a sustainable balanced fund (environmental, social, governance factors). Program consulting services are provided by AKF Consulting, investment consulting services by Meketa Investment Group, and legal advisory services by K & L Gates.
Pilot Success
This type of program is more important than ever. According to a study released today by the UC Berkeley Labor Center, half of private sector workers in California have no retirement assets at all.
CalSavers is poised to change that. Beginning with a select group of employers in November 2018, the pilot program—now with 1,647 total contributing accounts—has seen a promising average contribution of $91 per month across all full- and part-time workers and average savings rate of 4.93% per month. Employer feedback from the pilot has been leveraged to refine the program, ahead of broad rollout.
"We’re thrilled with the results we’ve seen through the pilot and believe that small steps can lead to giant leaps forward for savers," said Selenski. "We’re leveling the playing field for workers who haven’t had access to two of the most powerful savings tools—automatic enrollment and saving via payroll deduction—and proving that workers at even low income levels will save when they have access to these easy tools."
Lorenzo Harris, owner of Janico Building Services, a commercial janitorial services company based in North Highlands near Sacramento, was the first employer to join the pilot program in late 2018. "Janico operates in a tight labor market with 4.3% unemployment in California and triple digit average employee turnover in the building service contracting industry. CalSavers is just what our company needed to help attract and retain good workers," said Harris.
Simple Design and Easy Employer Compliance
Beginning July 1, 2019, eligible employers of all sizes can register for CalSavers at www.calsavers.com. By law, every California employer with five or more California-based employees who doesn’t already offer an employer-sponsored retirement plan will eventually have to begin offering a retirement savings program, either through the private market or by facilitating employee access to CalSavers. Employers with more than 100 employees who do not already offer a retirement plan will have until June 30, 2020 to register. Employers with more than 50 employees will be required to register by June 30, 2021, and those with five or more employees by June 30, 2022. Eligible employers of any size are encouraged to register at any time starting now, regardless of their registration deadline.
Once enrolled, employees can choose their own contribution rate, up to the federal annual maximum of $6,000 for those under age 50 and $7,000 for those over age 50—the same as any IRA—with deductions automatically made from each paycheck. While participating employees will be automatically enrolled at a savings rate of five percent per paycheck, individuals can choose their own savings rate and investments, or opt out at any time. Participant fees are low and expected to shrink further as the program grows to scale. Accounts stay with employees, even if they change jobs, and self-employed and "gig" workers will be allowed in starting September 1, 2019.
Watch the CalSavers Launch LIVE Here: https://www.facebook.com/CaliforniaSTO/
Follow Along on Twitter Here: @CalSavers
About the CalSavers Retirement Savings Program
The CalSavers Retirement Savings Program ("CalSavers") is an automatic enrollment payroll deduction IRA overseen by the California Secure Choice Retirement Savings Investment Board ("Board"). For more information about CalSavers, visit www.calsavers.com, email CalSavers@sto.ca.gov, or follow the program on Twitter at @CalSavers.
About Ascensus
Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit www.ascensus.com.
Source: California State Treasurer
