Departing CalSavers' leader tackled lawsuit, pandemic while launching state-run retirement plan

It was six years of challenges as well as accomplishments for Katie Selenski, who served as the CalSavers Retirement Savings Program's first executive director.

Ms. Selenski told Pensions & Investments her last day on the job is April 14.

During her tenure, she shepherded the Sacramento-based defined contribution plan for California workers in the private sector who do not have access to an employer-sponsored retirement plan. The program is structured as an automatic-enrollment, payroll-deduction individual retirement account.

Since its creation by state law in 2016, CalSavers grew to $478 million in assets and 417,822 savers, up from 243,394 a year ago.

While it's been an opportunity of a lifetime to lead the team who built the program and work with colleagues across the country, Ms. Selenski said she wants "to explore new ways to make an impact."

And she felt it was good timing for the program, too. She and her colleagues had finished signing up "a massive wave of employers," negotiating a contract and supporting a bill that expanded the plan to all California employers. A new leader would have time to acclimate before the next employer deadline at year's end, she said.

So far, California Treasurer Fiona Ma has yet to announce a successor and does not have a timetable for making a selection, said Joe DeAnda, the treasurer's spokesman, in an email.

"CalSavers has a talented and professional team, and the board is confident in their ability to keep the program operating smoothly in the interim," Mr. DeAnda said. "While we'd like to appoint a replacement quickly, we will take our time to ensure that we find the best candidate for the job."

For Ms. Selenski, it hasn't been easy. Along the way, she rolled out the plan during a worldwide pandemic and fought a taxpayer group lawsuit that unsuccessfully tried to shut down the new plan entirely. In February 2022, the U.S. Supreme Court declined to hear the taxpayers group's case, effectively letting stand a lower court's decision to dismiss the lawsuit brought by the Howard Jarvis Taxpayers Association.

In the early days, plan officials also had to combat the financial services industry — unhappy at the prospect of the state government taking business away.

"When I got here six years ago there was vocal opposition from financial services industry," which saw the plan as undue governmental competition, Ms. Selenski said.

"There was some nervousness expressed to me," but that has quieted down substantially, she said.

The California Legislature established the plan to create a path for people who don't otherwise have access to a retirement savings plan, Ms. Selenski said.

"Starting anything from scratch would be challenging," Ms. Selenski said. "But we had the added challenge of communicating a brand new employer mandate to all employers of the state on a shoestring budget."

The biggest issues revolved around the realities of the people the plan was designed to serve, Ms. Selenski said.

"There are reasons the lower-income and smaller-business part of the market have been underserved," Ms. Selenski said.

Lower-income workers are highly mobile, moving from job to job and residence to residence, she said.

"Their limited tenure means limited savings," Ms. Selenski said. "It underscores why government has a role."

About half of working Californians are on track to live at or near the poverty level upon reaching retirement age, according to information on CalSavers' website.

In August, California Gov. Gavin Newsom signed a law expanding the CalSavers program to include employers with as few as one employee, down from five or more.

There's also a lot of change in the microbusiness community, she said. "Tens of thousands go out of business each year," which also makes it harder to run the program, Ms. Selenski added.

She acknowledged recent innovations are starting to ease the way for small businesses and low-income workers throughout the country.

A new retirement security package passed by Congress in December dubbed SECURE 2.0 includes a saver's match program, giving lower- and middle-income Americans a 50% matching contribution of up to $2,000 in retirement savings annually deposited directly into an IRA or retirement plan.

And firms such Willis Towers Watson PLC are starting to offer pooled 401(k) plans for multiple employers.

Even with these new efforts, state-run retirement savings programs remain necessary, Ms. Selenski said. Research has shown that state-run plans spurred the formation of new private-sector plans in those states that have them, she said.

In December, The Pew Charitable Trusts unveiled a study of U.S. Department of Labor data from 2013 to 2020 in the first year after the state-run retirement programs in Oregon, Illinois and California were launched; 35% more businesses adopted private defined contribution plans in the three states combined than states without programs.

"We're not here to compete," she said. It turns out that the state-run plans created a business development opportunity for the private sector, Ms. Selenski said. It might be early to say, but the combination of pooled employer plans and state mandates "could prove to be impactful in expanding retirement savings for workers through new plan formation," she said.

The government still has a role to play to serve people who have "slipped through the cracks," Ms. Selenski said.

The Secure 2.0 saver's match could make a difference for low-income savers, she said. Secure 2.0 also enhanced the tax credit for small businesses launching a retirement plan that could "move the needle" for some company executives who were already considering starting a retirement savings plan, Ms. Selenski said.

"It will probably not make a difference for really small, microbusinesses whose margins are so thin they can't imaging spending anything more," she said.

Those employers will always need the free option of a government-sponsored program, Ms. Selenski said.

If she could do anything she wanted to enhance the state-run program, Ms. Selenski said she would like federal rule changes to allow incentives for employers and employees to participate in the programs.

The £25 billion ($30.8 billion) National Employment Savings Trust, London, a defined contribution multiemployer plan, has incentives as part of its structure, she noted.

She also would like to see more work on the possibility of establishing workplace emergency savings accounts for employees. London's NEST created a trial program in 2019 to auto-enroll savers into an emergency savings account to draw on, rather than stop contributing to their retirement savings plan or resort to high-cost debt sources, according to NEST's website.

And if Ms. Selenski had a magic wand, she would tackle the real issue stopping many people's ability to save for their futures: low wages.

"I would like to see movement in the minimum wage," she said, declining to set a target for the wage.

As for Ms. Selenski's future, her next chapter has yet to be written. She said she will start weighing her options once she has separated from her government role.

"I'm looking forward to seeing what's out there," Ms. Selenski said.

"I'm really grateful that I've been able to do this work, have an impact and work with great people who have the same mission. ... I feel very lucky."