The National Institute on Retirement Security (NIRS) hosted a webinar in conjunction with state-sponsored retirement savings plans in Illinois and California to discuss details and progress on the new plans.
According to NIRS research, 71% of employees said they believe state-sponsored plans are a good idea, and nearly three-quarters of Americans said they would participate in such a plan. This growing support toward state-run plans is expected to increase in the future as well, as workers and employers feel effects from the COVID-19 economic crisis.
Some changes have been enacted as a result of the pandemic. CalSavers, California’s new retirement savings program, extended its enrollment deadline to September 30 for businesses with more than 100 employees, said Katie Selenski, executive director at the California Secure Choice Retirement Savings Investment Board.
The program is offered to California workers whose employers do not offer a workplace retirement plan and to self-employed workers. CalSavers provides a Roth individual retirement account (IRA) and requires that all employers with five or more employees that don’t already offer a retirement plan to either begin offering a qualified plan from the private market or register for CalSavers. The plan has automatic escalation at 1% annually—up to 8%—defaults participants’ first $1,000 into a capital preservation fund, and then puts their money in a target-date fund (TDF). Other investment options include a core bond fund, global equity fund and an environmental, social and governance (ESG) fund.
Employers that facilitate CalSavers for their employees will not bear traditional responsibilities held by plan administrators. These organizations will not incur any program fees, be fiduciaries of CalSavers or be required to make an employer contribution, Selenski added.
The Illinois Secure Choice retirement savings program has seen changes in response to COVID-19, said Courtney Eccles, director for the program. Eccles stated that while there was no consistent increase in partial or full withdrawals by participants, the state saw a decline in contributions month over month. While $3 million was the contribution level in pre-COVID-19 months, in April, contributions of just over $2 million were received. The state also saw a significant decline in new registration and employee uploads, Eccles said.
The plan is offered to employers with 25 or more workers who have been in business for a minimum of two years, and it invests participants into a holding fund for the first 90 days, then sweeps participants to a TDF. The plan also offers capital preservation funds, conservative funds and growth funds. The Illinois Secure Choice retirement savings program is not currently available to self-employed individuals.
Similar to CalSavers, employers that offer a plan through the Illinois Secure Choice retirement savings program will not be subject to Employee Retirement Income Security Act (ERISA) fiduciary responsibilities, are not required to make employer contributions or matches to the plan, and are not responsible for administration requirements as with employer-sponsored plans.
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