CalSavers will launch in November
The Laura and John Arnold Foundation today announced a $1.1 million grant to Small Business Majority and United Ways of California to support the launch of CalSavers, a retirement program created by the state to improve retirement security for private-sector workers and boost individual savings.
CalSavers is an automatic-enrollment Individual Retirement Account (auto-IRA) program that makes saving the default option for employees. Workers who do not have access to an employer-sponsored retirement plan are eligible to enroll in the program. Research shows automatic enrollment leads to dramatic increases in retirement saving participation.
“People deserve to retire at the end of their careers,” said Kelli Rhee, LJAF’s President and Chief Executive Officer. “But many hourly-wage workers, small-business owners, and others don’t have a way to save for retirement. CalSavers is a low-cost, professionally managed retirement savings program that will finally give workers a means to prepare for their future.”
Retirement planning is an urgent public policy issue in the United States. Roughly a third of U.S. workers do not have any retirement savings, and nearly half do not have access to a retirement plan because employer coverage in the private sector has declined steadily since the 1980s.
The grant to the United Ways of California and Small Business Majority of California will help defray the program startup costs and in turn reduce the fees paid by participants. CalSavers will cost nothing to taxpayers to launch or operate and will be one of the most competitively priced IRAs in the marketplace when it reaches scale.
“A groundswell is building across this nation to empower working women and men to salt away savings for a dignified and secure retirement. States — like California, Oregon, and Illinois — are laboratories of bold democracy dedicated to heading off the growing humanitarian catastrophe found in each successive generation of Americans retiring poorer than the last,” said California State Treasurer John Chiang. “Thanks to the Laura and John Arnold Foundation for their generous contribution to help promote CalSavers. Together, we will help workers help themselves build true and enduring prosperity.”
When CalSavers opens enrollment in November, it will become the third auto-IRA program in the U.S. following in the footsteps of Oregon and Illinois. OregonSaves launched first in 2017, and 73 percent of eligible workers are participating in the program. Participants are contributing an average of 5 percent of their paycheck, saving a total of $7.7 million during 2018. The early results from Oregon suggest that in the absence of federal reforms, auto-IRA programs are states’ best option for expanding retirement plan coverage, and Connecticut, Maryland, and New York have already passed legislation to create similar programs.
LJAF’s support for CalSavers is part of the foundation’s broader efforts to create retirement systems that will allow workers to maintain their standard of living when they leave the workforce. The foundation funds and conducts research on public and private retirement plans to understand how to improve those systems, and partners with governments and others to create stronger safety nets. In addition to promoting the expansion of auto-IRA programs, LJAF supports efforts to provide workers with annuities or a form of “lifetime income,” and innovative ideas to improve existing retirement products.