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Retirement Plans

Multistate private-sector retirement pact getting some serious attention

Washington state Sen. Mark Mullet, a proponent of the secure choice concept, is looking at how his state could join the existing Oregon plan.

7 states already considering laws to approve partnerships

With state-sponsored private-sector retirement programs underway in 10 states, and another 20 legislative proposals expected in 2019, the stage is being set for a collaborative model to get many more states in the game.

The basic idea is for interested states to be able to tap into programs already built rather than starting from scratch. The concept takes a page from 529 college savings plans and Achieving a Better Life Experience plans for people with disabilities, from which states have learned that they can achieve efficiency and economies of scale by sharing such programs.

"I'm hearing a lot of interest from the states, and a lot of states are engaging in that discussion," said Sarah Mysiewicz Gill, Washington-based senior legislative representative for AARP. "We are really excited about it. It's the spirit behind these pro- grams to aggregate small businesses."

So far, seven states — including some that have already passed secure choice legislation — are considering legislative language allowing for such partnerships, and many other private-sector retirement bills being considered this year would allow treasurers or other officials to decide whether collaborating with another state program is the most feasible approach.

"It gives them the running room to make that decision," Ms. Gill said.

Some bills have an interesting twist, calling for collaboration as the next step if their initial programs don't produce the desired participation results.

That is where Washington state now finds itself, after its first private-sector effort — a small-business retirement online marketplace that was similar to one in New Jersey — failed to get enough interest from providers, employers or employees. The program is currently inactive.

State Sen. Mark Mullet, who sponsored the first idea, is now sponsoring a bipartisan-supported bill allowing the state to tap into OregonSaves, the first secure choice program to launch that now has $14.5 million in assets. If that happens, a secure choice program under development in Seattle would follow.

Keep it simple

Angela M. Antonelli, executive director of the Center for Retirement Initiatives at Georgetown University in Washington, stressed that "keeping the design simple is key," and pointed to four general models for multistate collaboration:

Another state contracts with an established state plan to handle program administration.

An interstate alliance jointly structures and administers a program for those states in the alliance.

A turnkey private provider develops a customizable platform that can be used by individual states.

A 529 plan approach where a state has an "open" program and individuals and employers from other states can sign up.

"I am genuinely excited about moving forward. The hope is if we can show how this partnership works, I think other states will follow," said Mr. Mullet, a Democrat. He said he was able to sell the idea to Republican legislators "because it didn't cost anything to get a program up and running. We are hopefully showing the red states a path," he said.

It makes sense to red state Wyoming, where a just-finished legislative task force report noted that, given Wyoming's small employee and employer base, "it appears we may be more successful to wait and join another program … positioning our state to benefit from proven concepts as soon as the time is right is a proactive step that will help future generations."

It also makes sense to officials in some of the 10 states that already have launched secure choice programs, particularly first movers Oregon, Illinois and California, which mandate that employers not offering retirement plans enroll workers in payroll deduction IRAs. Oregon officials said they would welcome more participants and assets, while Illinois and California are open to the idea but haven't moved beyond that yet.

Other models include Massachusetts, with a defined contribution plan for small non-profits, and Vermont's multiple employer defined contribution plan. Almost-ready programs include Maryland's small-business retirement savings program set to launch in late 2019 and New York's voluntary payroll-deduction IRA. All the programs are expected to be fully implemented between 2020 and 2022.

Partnership value

"We think there is a lot of value in partnerships for those states who don't have a ton of resources to put together a program," said Michael Parker, Salem-based executive director of the Oregon Savings Network, which includes OregonSaves and the 529 and ABLE plans.

"What we really think is a benefit to this movement is to get as many people covered as quickly as possible," said operations director Joel Metlen, in Tigard, Ore. A similar multistate partnership approach with the ABLE plan "allowed us to focus on getting people into the plan. The speed to market is going to be much faster," said Mr. Metlen, who noted that building the retirement savings program, including decisions about investment options, "was two years of pretty intense work," while multistate collaboration "is the evolution of the model."

Oregon has also learned from fellow pioneer state Illinois, which just celebrated $1 million in assets for its new program, and California, with innovations including environmental, social and governance investment options.

"It's been an iterative process and one where the states have really benefited from each other. I think that's a big benefit for businesses, too," said Mr. Parker, whose office is working with payroll providers to make the process easier for employers. "The interest is not going to stay with these three states. We are talking to a lot of states about this. There is a lot of enthusiasm," he said.

Katie Selenski, Sacramento-based executive director of California's CalSavers Retirement Savings Program, said her office for now is "laser focused" on getting the program launched smoothly during a pilot phase that ends in July, including integrating with payroll provider technology. In the meantime, they are "monitoring conversations about possibilities for multistate partnerships and (are) open to innovative ideas. We are excited to see so many more states in the pipeline on auto IRAs and we frequently talk with them about lessons learned and how we can support each other," Ms. Selenski said.

The Maryland Small Business Retirement Savings Program "is being designed to make collaboration easier," said Chairman Joshua Gotbaum. "Part of the reason we set up Maryland's program as a non-profit rather than a state agency was to make it easier to work with others," Mr. Gotbaum said.

Interstate collaboration also can address concerns raised by the financial services industry about dealing with small accounts and 50 different sets of rules. "As state retirement programs have launched, the financial industry has begun to see the business opportunities that come from creating thousands of new savers," CRI's Ms. Antonelli said. "It is exciting to see several states taking steps this year to consider such arrangements."