2020 Retirement Marketplace Biennial Report

Summary

The Washington State Department of Commerce submits its 2020 Retirement Marketplace Biennial Report to the Legislature, dated December 2020, under RCW 43.330.747. The report states that between March 2018 and June 2020 the program website had 28,200 unique visitors, generating 693 referrals to participating financial partners with a conversion rate of 2.5%, and that 16 businesses enrolled a total of 96 employees. It lists $1,290,696 in retirement savings and states that the program offers nine plans through three financial services firms. Its recommendations are to change the administrative fee structure, reduce provider requirements to offer multiple plans, expand the program to businesses of all sizes, and increase funding for marketing.

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 Retirement Marketplace



2020 Biennial Report to the Legislature pursuant to RCW 43.330.747




                                              December 2020
      OFFICE OF ECONOMIC
      DEVELOPMENT AND
      COMPETITIVENESS                         REPORT TO THE LEGISLATURE

                                              Lisa Brown, Director
2.3
Acknowledgments

Chris Green, Assistant Director, Office of Economic
Development and Competitiveness

Tracy Gunter, Retirement Marketplace Program Manager and
Report Writer




Washington State Department of Commerce
1011 Plum St. SE
P.O. Box 42525
Olympia, WA 98504-2525

www.commerce.wa.gov

For people with disabilities, this report is available on
request in other formats. To submit a request, please call
360.725.4000 (TTY 360.586.0772)




 2020 Retirement Marketplace Biennial Report
Table of Contents
Introduction ........................................................................................................................................................................... 2

Program Overview ................................................................................................................................................................ 3




  2020 Retirement Marketplace Biennial Report                                                                                                                                        1
Introduction
Authorizing Legislation
Every two years, the Washington State Department of Commerce (Commerce) submits a report to the Legislature on the
state’s Small Business Retirement Marketplace under RCW 43.330.747 as follows:

    "The director shall report biennially to the legislature on the effectiveness and efficiency of the Washington small business
    retirement marketplace, including the levels of enrollment and the retirement savings levels of participating enrollees that are
    obtained in aggregate on a voluntary basis from private sector financial services firms that participate in the marketplace."

The 2020 report reviews the Marketplace’s operation, performance, findings, and recommends actions to improve the
effectiveness of the program.

Background
More than one million Washington residents do not have access to a retirement savings plan at their places of work.
Washingtonians are significantly unprepared for retirement, which creates significant risk for an aging population in terms
of economic safety and security.

The Retirement Marketplace program currently offers nine plans through three financial services firms. The Department
of Financial Institutions or the Office of the Insurance Commissioner must verify that a plan meets the requirements set
forth in RCW 43.330.732(7) and RCW 43.330.735 before it is accepted into the program.

Individuals and employers access these plans through Commerce's program website (retirementmarketplace.com). The
site offers individuals and small businesses a way to compare and shop for low-cost, easy-to-manage retirement plans.
When a plan is selected on the website, the appropriate financial provider works directly with individual or business
owner to set up a plan. By statute, plans cannot charge fees greater than 1% of the account balance and cannot charge an
administrative fee to an employer.

Figure 1. Landing page for the Retirement Marketplace website




 2020 Retirement Marketplace Biennial Report                                                                                           2
Program Overview
Highlights
Between March 2018 and June 2020, the website has had 28,200 unique visitors. This web traffic generated:

    693 referrals to participating financial partners, yielding a conversion rate of 2.5%
    16 businesses that have enrolled a total of 96 employees
    23 individuals accounts
    $1,290,696 in retirement savings

Key Findings
Brand Development and Marketing
One of the keys to program success is getting businesses and individuals to the website. The time, expense, and expertise
needed to attract and sustain attention is significant. The program has actively engaged with partners to leverage the
program's limited marketing resources. Examples of marketing efforts include:

        Facebook, LinkedIn, and targeted radio and print campaigns
        Promotional campaigns with industry associations
        Collaborations using marketing resources of other state agencies and local entities
        Website redesign
Plan Availability
The program currently offers nine plans through three financial service providers. A number of other providers, including
nationally recognized firms, have expressed interest in the program but have declined participation. Firms typically cite
the fee structure (specifically not being able to charge employers fees), fund requirements, and the potential pool of
accounts as common reasons for not enrolling in the program.

Voluntary Programs
Data from other savings programs suggest that participation in voluntary program is limited to approximately 5% of
eligible participants. For example, Washington State's Deferred Compensation Program began as a voluntary program and
participation never exceeded 5% participation. In 2017, the program switched to auto-enrollment with the option to "opt-
out". Over 90% of eligible participants now enroll in the savings program. Data collected by the Center for State and
Local Government Excellence1 found similar results with the Supplemental Retirement Savings Plan for South Dakota
public employees.

Recommendations
     Change the administrative fee structure in RCW 43.330.735(11)
     A number of high-profile financial firms have inquired about listing products on the Marketplace, but few have
     enrolled. Current legislation does not allow providers to charge employers fees, which in turn prevents them from
     covering the cost of enrollment and account maintenance. The ability for a provider to charge an employer a flat fee
     or a cost per participating employee fee would very likely make the Marketplace more appealing to providers and
     increase plan availability. Fee structure should continue to be reasonable so as not to discourage businesses from
     enrolling into a savings plan.




1 Issue Brief: Impact of Automatic Enrollment in the 457 Plan for South Dakota Public Employees




 2020 Retirement Marketplace Biennial Report                                                                           3
   Reduce provider requirements to offer multiple plans
   RCW 43.330.735(7) requires plan providers to offer a minimum of two product options: (a) A target date or other
   similar fund, with asset allocations and maturities designed to coincide with the expected date of retirement and (b) a
   balanced fund. Many firms report they do not offer both types of retirement funds. Current providers report they had
   to create special products to fit the constraints of the state's legislation. A requirement to offer at least one diversified
   investment product can provide security for savers without mandating balanced and target-date funds specifically.

   Expand the program to businesses of all sizes
   RCW 43.330.730(3) states that an eligible employer allowed to participate in the Marketplace is one with fewer than
   100 qualified employees. Our plan providers report that it takes nearly as much work to enroll a small business as it
   does for large ones. Removing the 100-or-less employee minimum, or increasing the minimum, would broaden the
   potential pool of business accounts and make the program more attractive to financial partners.

   Increase funding for marketing
   Ultimately, the number of accounts created and the total amount saved for retirement are the true measures of
   program success. This cannot occur without greater brand awareness to establish the program as a trusted way for
   businesses and individuals to save for retirement.




2020 Retirement Marketplace Biennial Report                                                                                  4


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