Podcast 107: What Happens Next for CalSavers? With Fiona Ma & David Teykaerts

Steve Chen (00:05):

Hi folks, this is Steve Chen, the host of Boldin Your Money podcast. And today we’ve got Fiona Ma, the treasurer of California and David Teykaerts. We’re going to be diving into the CalSavers program, how it got started, why it got started, what it’s doing for people in California, and how it’s benefiting both employers and employees. So with that, Fiona and David, welcome to our show.

Fiona Ma (00:33):

Thank you. Thank you for having us. Yeah,

Steve Chen (00:35):

No, appreciate the opportunity. Yeah, as a long time, I think I’ve been here 30 years, resident of California. It’s cool to meet you in person and appreciate your work. Fiona, as we get rolling, as I was researching you, I grew up in Rochester. I saw you went to RIT, so kind of a small world moment.

Fiona Ma (00:51):

So cold.

Steve Chen (00:52):

I know. No going back right after you get to California.

Fiona Ma (00:56):

Knowing, but going back. This is why we pay a little bit more taxes for the weather and the sunshine.

Steve Chen (01:02):

100%. I would love to get just a little bit kind of the day-to-day, well, a little bit about your journey and what it’s like to run the treasury for the fourth largest economy in the world. I saw that we recently passed Japan. Well, I’m kind of proud of this as a California resident, right? So this economy is behind only the US, China, and Germany.

Fiona Ma (01:26):

Correct.

Steve Chen (01:27):

Yeah. So yeah, I would love to hear your story.

Fiona Ma (01:29):

Yeah. So I’m the oldest child of immigrant parents. My parents left China at a early age, immigrated to Hong Kong. They met in Toronto, Canada, and then settled in New York because my maternal grandfather was a minister, Presbyterian minister, and my mom was an only child. And so she basically followed my grandfather and whatever church she was at. And so my parents settled in New York City where I was born and raised. After working four years in Yonkers, they saved enough money to buy our first house in Great Neck, Long Island, where I went to elementary, junior high and high school, Great Neck North. And then I decided to go to RIT because number one, back then, my parents did not want me to get on a plane to go to school. So I could basically go wherever was drivable or busable. And back then, I wanted to be an accountant or my father wanted me to be an accountant.

(02:22):

And RIT had a very specific CPA track with two paid internships. And so I did my two paid internships with Ernst & Winnie in the Manhattan office in the Trust and Estate Department. And they actually did offer me a job after. But by this time, my parents decided to move to San Francisco again, following my grandfather and the church. And so that’s how we ended up out in San Francisco since 1985. And I moved out here, decided to interview again with all the big eight accounting firms and decided to stay with Ernst & Winnie, but in the real estate tax group. And so I worked there for five years and then quit and started my own practice at the age of 28 years old, became the president of a small business association. And that was the first time I got involved in politics, going down to San Francisco City Hall to lobby the mayor and the board of supervisors, testifying on bills in Sacramento, getting involved in the White House Conference on Small Business under President Bill Clinton.

(03:22):

And I started getting more and more interested in government and public service and politics. And I started to realize and understand that these people, they control the money, the budgets, they control the laws that are assigned, the regulations, they appoint people. So very, very powerful positions. And more importantly, I wanted to help people. And so I got a part-time job with Senator John Burton for seven and a half years, helping constituents in San Francisco while I still had my practice, sat on the assessment appeals board as an alternate member hearing both residential and commercial property tax appeal cases. And then finally ran for the San Francisco Board of Supervisors. Back then, 2002 to 2006 during the dotcom bust, I ran in the Chinese seat at the time, District four, the Sunset District. And when I won, I was the only Asian member on the 11 member board and only the second woman.

(04:20):

So San Francisco, we are the only city and county combined in the whole state. So I served there for four years and I really did not like it. Lots of men fighting and that wasn’t really what I signed up for. Then I ran for the state assembly 2006 to 2012. I served under two different governors, Arnold Schwarzenegger and Jerry Brown. I had three different speakers and during the Great Recession. So second position, also in deficit budget years. Then I ran for the State Board of Equalization, a tax board. So my dad was getting a little bit happier with me that I wasn’t wasting my education. Moving up. Yep. And then when I became chair my second year, I called in three audits and Governor Brown essentially disbanded the Board of Equalization, took away the taxing authority as well as the appeals, and then ran for state treasurer in 2018 and then reelected in 2022.

(05:16):

So I never thought I was going to be in politics. I thought my path was to be a partner in CPA firm, one of the big eight or one of the big four now, but something called me and pulled me. And this has been my life’s passion and purpose for the last 30 years. So just very happy to be in this position. And finally, my father is proud that I am the treasurer of the fourth largest economy in the world, and he’s not bugging me to go back and do people’s taxes.

Steve Chen (05:46):

And it’s amazing what it takes, right? I got the tiger dad like, “Hey, finally, you’ve gotten something done. Really great.” That’s awesome. Do you know Josh Becker?

Fiona Ma (05:55):

Yes.

Steve Chen (05:56):

Yeah. So Josh went to school with my brother, Tim at Stanford. And so he’s the only other person I really know that’s in California politics. And so it’s just interesting to … I know his story a bit through venture capital and stuff like that and hearing your story. I love the fact that you came from private sector, kind of obviously immigrant and kind of like Herschel Alger, making your way and proving yourself and then hopefully bringing all those good practices to California and pragmatic thinking. Yeah. So awesome. So would love to appreciate that and just kind of like understand the why and how behind Cal Savers. When I was looking at it, I kind of thought that there was like a government, a federal mandate to do these things, but it sounds like now this was like an idea that started in California and now has spread to other states.

Fiona Ma (06:46):

Yeah. So I am the banker. I’m one of eight statewide elected officials and under the Constitution, back then all the gold came into the treasurer’s office. So I have a big safe in the basement of our building. But essentially, we take in all the money. It’s about over $3 trillion every day. We invest every, there’s not one penny that is sitting in our account. So every day I have an investment team. Our short term portfolio is about 160 billion, generate about $17 million a day for the state of California. And then I issue all the bonds for the state of California, the UC and the CSU systems. So that’s kind of the bread and butter of the treasurer’s office. And then when then Speaker Jess Unruh, very powerful speaker in the legislature, he became treasurer. He said,” Well, we’re sitting on all this money. We should be doing more.

(07:39):

“So today I chair 15 boards that funds and finances, affordable housing, children’s hospitals, emergency crisis fed and regular hospitals, public transportation, green energy, advanced manufacturing, garbage and recycling, public transportation, small businesses. And then I have four savings programs. Scholarshhare 529 is probably the one that has been around for the longest time, trying to encourage parents and guardians to put money into a child’s higher education goals. And then the newest programs is Cal Savers. David Takharts is my executive director and he’ll talk a little bit more about the nuts and bolts. CalABLE, which is a savings program for people with disabilities.

(08:26):

And that program has changed a little bit as CalSavers has starting January 1st, 2026. And then our most recent program is our HOPE accounts for any child that lost a parent or guardian due to COVID or kids longtime foster youth in the system for 18 months or more, we will be making available $3,000 into their child savings accounts for higher education or a certified apprenticeship programs. So those are the three four programs that started under the treasurer’s office when I started seven years ago. And we have done really, really well in terms of all of our metrics, making sure that more people are aware of what is available, they’re opening accounts, they’re saving more, and just staying out of high consumer or student loan debt is basically one of my main goals.

Steve Chen (09:19):

Yeah, for sure. We’ve definitely seen kind of these generational challenges with debt. I’m a Gen Xer, right? And so a lot of folks and Gen X got in trouble with credit card debt and then a lot of the millennials got in trouble with student loan debt and just there’s always ways people will … A lot of this comes back to literacy, right? So I think one of the … I know that there was a law passed recently in California that requires high school students to take a personal finance class. I know Tim runs that over at Next Generation Personal Finance and he’s been advocating for that. So it’s great to see that kind of stuff start to happen and educate folks when they’re younger. But yeah, would love to dive into kind of Cal Savers. And so I guess, how’d you see the problem and how’d you decide to like, let’s create this?

Fiona Ma (10:08):

Well, I didn’t create it. So it was members of the legislature. Back then it was Kevin DeLeon who was a member of the Senate that really has been spearheading the program and recognizing that there’s seven million workers in California that are not covered under a retirement savings plan. Not that employers don’t want to, but it’s just really expensive. It’s difficult to keep the paperwork. You have to track all your employees all the time. And so we were looking for a way for workers to be able to save that would encourage them to save, but then that would stay with them. And so that’s kind of the genesis of this program. It is a post-tax kind of similar to a Roth IRA program. You set it and you forget it. You take a certain percentage out of your paycheck every month and then you don’t see it so you don’t spend it and that money grows.

(11:02):

And just in case you need it for something, rainy day emergency situation, that money is available to you. So it’s working. I’m going to turn it over to David that this is a game changer, especially for entrepreneurs, smaller employers. Maybe you have one or more employee and this now you’re still able to offer something to your employee and enable your employee to really save. Because sometimes if you’re not trained to save through your parents’ encouragement, you just don’t think about it. And then when there’s an emergency, you just max out your credit card and very, very hard to get out of that debt if it keeps continuing. So this is a way to really try to, on the front end, save for those rainy days, so to speak.

Steve Chen (11:50):

Yeah, 100%. Yeah. David, I’d love to get your take on … I know that you just passed a big milestone, right? So I think there was essentially a goal to get mandate employers sign up and get it deployed. And so we’d love to hear the stats on what’s happening.

David Teykaerts (12:04):

Sure thing. And thanks again to you and to Treasurer Ma for allowing me on the podcast here. I’m David Teykaerts. I’m the executive director for CalSavers, which means that I run the day-to-day operations and kind of like sit in the middle of the web, making sure that all the different pieces of this complicated program are working in relative harmony for a relatively new program that is truly, as you mentioned, I mean, it is a game changer. We are really trying to change part of the business culture for California. And essentially the mantra that we kind of work with is if you have a job, if you have a job and we know what a job means versus like starting a business, side hustling, gig work. No, if you have a job, then you’re going to have access to a workplace retirement savings program. And conversely, if you’re an employer, if you pay paychecks, if you pay wages, then part of that deal is that you provide access to a qualified retirement savings program.

(13:04):

So that’s the genesis of this. That’s what it’s about. I want to point out a subtle piece of this one on a lot of programs out there is that we’re genuinely agnostic about whether participants utilize the Cal Savers program in and of itself

(13:20):

Or a qualified private sector plan with potentially more bells and whistles. And frankly, could be more lucrative and beneficial for those savers. So like the law, the actual Cal Savers law that was passed, the bills signed in 2012 and then effectuated over the next few years as it was developed and then launched in 2018. The law just says that workers have to have access to a qualified plan unless there’s a qualifying exemption. So all businesses that offer a 401k, for example, is the classic example or any other qualifying plan. And there’s a sort of list of what makes it qualifying. But as long as the business offers any of those, we’re good. That person is considered to be in compliance just as much as a participating employer for us. So I just want to stress that’s sort of unique amongst government programs is we’re trying to say, you just have to do something.

(14:14):

You have to do something, you have to provide access for your workers because sort of like the fundamental presupposition here is that most people are going to be more likely to save by multiple factors, 15 times more likely to save if they say if it’s available through their work. And that just rockets up to 20 times more likely if this is all just done automatically. So I’ll stop there and then we can move forward. I know looks like Fiona might have stepped away, so happy to continue.

Steve Chen (14:42):

But no, it’s great. And then I think one thing that’s been awesome is, I remember when I first started working way back in the 1990s, it was like I had Fidelity walked in to my first employer, got to college and they were like, “Hey, there’s this thing called a 401k.” We didn’t know anything. It’s like, well, pensions were going away. I mean, some state folks still get pensions. And 30% of our users still have pensions, but it was like, “Hey, there’s a 401 and then some light education and invest in some stuff.” And actually the thing is in the beginning, the investment vehicles were expensive, the defaults, there were no defaults, right? So there’s no minimums, nothing. Now I know with retirement savings plans, they have default saving rates, they have auto escalation, they have hopefully a good investment lineup with low fees. I didn’t have a chance to dive into the details of the program, but I would love to learn more about the vehicles and some of the stuff that you put in place.

David Teykaerts (15:35):

Certainly with your permission, Treasurer, I’ll take that one. So you’ve got it right. What we’ve tried to do are the architects of the Cal Savers plan and other states that have rolled out similar plans. And again, as another caveat here, as you mentioned, there were attempts for many, many years, even decades to have a federal version of this that applied to all Americans. And in fact, there are still efforts to do that. It’s sort of like a recurring pet project of several legislators, but since nothing was happening in terms of actually effectuating it, the states took actions individually. And so the first three to do this were California, Oregon, and Illinois, sort of all in a trio. And they all borrowed the best practices and lessons learned from the 401k experience that you mentioned here, which is that you can’t just say people, “Hey, guess what?

(16:23):

You’ve got a savings program, you got an investment program, knock yourself out in good luck, Tia, bootstrap your way up.” Instead, the product design is absolutely paramount for us. Most of the time and effort has been put into making this as simple and really, not just no effort, but you don’t even necessarily need to be cognizant of it happening from that saver perspective. We wanted it to be such that a person can do literally nothing, but if their employer does what they’re supposed to do, then this person will be saving for their future, literally nothing.

(17:00):

So it is definitely an opt-out program. The saver does not need to affirmatively make that volitional decision to say, “I want to start saving today.” They are nudged. A whole thing is based on nudging. We nudge those savers into it. They can then opt out and about 35% of people do for a variety of reasons, most of it being, I can’t afford to save right now. But for sure, the program’s design is based on taking away the need for just a normal working person to every single pay period, make that prudent decision to say, “I will now take 5% of this and put this in a savings account.” And then two weeks later, I’m going to do it again. And again, for years, decades, career, it’s just not likely for most non-exceptional long-term thinkers. So we really try to collapse this down into the core elements of what’s needed.

Fiona Ma (17:55):

And we’re about government, right? So there’s a lot of companies that offer retirement and then all of a sudden they go bankrupt and then all of a sudden the retirement is gone. So we are government and this is money that is saved in that person’s name. And because we’re government, we are always looking to decrease the fees. And David, just let me know that we just negotiated a great deal for our savers so that they can keep more money in their pockets because we’ve been able to negotiate better rates. So that’s what we’re always thinking. We’re not about making money and trying to nickel and dime everyone. This is really trying to encourage people to save.

Steve Chen (18:35):

Yeah. I think the government, I mean, frankly, does a good job like Medicare. I mean, it’s never perfect, but the government actually does a good job of being a mass market insurance vehicle. And yeah, I mean, I think a lot of folks, it is really saving and investing. It doesn’t like what I say about and we say about getting wealthier, it’s simple, but not easy. It’s like people have to figure out, make enough money so they can save something, start saving and investing, make sure it’s invested in the market, especially when you’re younger and do that for 20 years. And then over time, it’s amazing what happens. You get to capture the power of compounding and then you start having more and more money. And just the act of actually investing and feeling like you’ve got some money over here, like it changes your own orientation, like you’re now your own owner versus just a worker.

Fiona Ma (19:28):

Exactly. And so like growing up, my parents started saving for us as soon as we were born and I didn’t go into student loan debt. I actually had money left over that I decided to put into a down payment into a two unit building in San Francisco. So that started building equity for me that now I’ve been able to be in government, get paid a modest, I think $185,000, but I know because of equity and building equity and saving as well because my dad is always pounding into my head, “You need to save whatever job I’m at.” He’s like, “Put away $500 a month.” Right now I’ve got a scholarship 529. I’m putting $250 a month. I don’t have any kids, but just in case I find kids, needy kids that need a little help to go to college, I’ll be able to transfer that money to them.

(20:19):

So for me, if I don’t see it, I don’t spend it.

Steve Chen (20:22):

That’s awesome. So what are some of the stats? David, I’d love to hear from you. What are some of the stats that you’re seeing? I see that there’s 255,000 employers, about 600,000 savers, billion and a half dollars. Obviously if you get for every thousand dollars that these people save, you’re going to add another $600 million. So it’s like starting to get folks really kind of hooked into saving here is going to be pretty material.

David Teykaerts (20:46):

Yeah. The economies of scale are starting to kick in for us here. So again, the program’s now been in existence and launched, at least as a pilot since 2018. So we completed our first seven year contract term with our third party administrator, the folks that actually handled the day-to-day of a lot of this. And then as Treasurer Ma mentioned, we were able to … Now that we’ve established a proof of concept, now that after seven years, this program and now 13 other states have modeled their program on ours, it’s not going away. It’s not going to fail. There was a moment in time early on where someone could say, “Well, I’m just going to play a wait and see here because this was entirely new. The idea of having a backstopping retirement savings program for private sector workers that traditionally had never had access to savings, this was a bold and innovative leap forward.” And so there was some market trepidation around that.

(21:40):

I know that there was businesses and really like the private sector financial industry was a little bit squirrely around this too. But what it’s really done is sort of that rising tide raising all ships thing where in fact, not only has CalSavers not threatened or taken business from legacy financial institutions, they’ve in fact seen like 22% growth because again, the mandate, the actual law

(22:06):

Says you just have to offer the best possible … Pardon, let me walk that back entirely. You have to offer a qualifying retirement plan. And as you might imagine, some rather, if I’m a salesperson for a 401k program, that’s music to my ears. You get on the phone with your client and say, “You have to do something now. You’ve been on the fence about this. Here’s the deal we’re offering.” I mean, so I always found the resistance from industry to be, I was like, “Why are you objecting to this? It’s not going to hurt you. ” And that’s proven to be true. We don’t hear anything from them anymore.

Steve Chen (22:39):

Have you guys gone to the government, the federal … If you could … So I think obviously a huge driver. I mean, for me, I’ve always maxed my 401. And I had a solo 401k for a while and I was a small business owner. So what you learn in this country is that if you’re a small business owner and you’re tax efficient, you can stack money by taking advantage of the qualified savings and stuff. Do you ever consider going to the government, the federal government and saying, “Hey, let’s create a special exemption for these state programs.” Because people would fill their 401ks if they have a private sector and then fill this too. And additionally, that would drive a huge amount of savings for you.

David Teykaerts (23:17):

Well, we are really bound by … I mean, this is truly just a Roth IRA, that is the financial vehicle. People can convert over to a traditional or select a traditional. That is less than half of 1% of our population. For most people, it is the Roth for sure. And it currently does not have any special exemptions. So the same rules around contributions and distribution rates and salary income caps and everything else, it still applies to-

Steve Chen (23:45):

Why did you choose the Roth versus just a traditional IRA?

David Teykaerts (23:49):

For most of the folks that participate here, we’re talking about low to middle income ranges and just an enormous percentage of time, that’s the most post-tax is

Steve Chen (23:59):

Going to work out. They don’t get the tax savings.

David Teykaerts (24:02):

That’s correct.

Steve Chen (24:03):

Yeah. I mean, Roths are great too. I mean, I’m a huge champion of Roths and it’s awesome. Especially, I think a lot of younger people are funding their Roths in a pretty material way.

David Teykaerts (24:13):

It’s the clearest and simplest one. And the whole CalSavers product is designed intentionally to be bare bones. It is save money and we will … Unless you tell us proactively, we’re going to divulge you into a target date retirement fund based on your age, based on how long out the actuarial tables say that you’re likely to work. If you want to put it into a pure money market or we have an ESG fund or just a pure global equity fund, you can do that less than 2% of our savers do. Most of our savers take no affirmative action whatsoever, which that’s who it’s designed for.

(24:54):

It is designed to allow people to participate in the stock market essentially with little to no knowledge of that. And honestly, if you do nothing, it’ll work just fine. We have plenty of saver education tools for that person who wants to understand more about how this works. And if that lights the fire within them to go and do additional investments or get more sophisticated with it, they’re fully empowered to. But that’s really not what this program is for. It’s really for folks that just … We all know that it would benefit them to have savings and to be actively saving towards their future. So let’s just make that as easy as possible in a way that makes it as unburdensome as possible on the employer. Because again, it does require … I don’t want to make … It doesn’t take a lot, but that employer does have to do something.

(25:43):

There is a certain amount of time and brain that is being applied to this issue of retirement for workers that perhaps when they started that tiny business, they never thought that they would be having to think about that. Most entrepreneurs are really focused on the thing that they’re looking to sell, the thing they’re looking to accomplish. So we understand that this is like number 17

(26:06):

Thing, and so we’d wanted to make that as easy as possible. So it has no employer, it has no fees to the employer, it has no fiduciary obligation for the employer, which is huge. And there’s not only is there no required employer matching, it’s just not permissible. And so it’s trying to make this really the employers into just a passive facilitation pass through, but we shouldn’t diminize how much the employer has to do. They do have to load their roster and if they don’t integrate it with their existing payroll provider to make it easy, which is what we always recommend, to set it and forget it, then somebody does have to press the button every pay cycle. And so that’s the hitch and the idiot for us right now. If someone were to ask, “What’s the big challenge?” It is for us, it’s really on the employer side.

(26:54):

It’s really making it as easy and stimulating action for the employer to run that payroll because it doesn’t happen automatically unless they set it up that way. And so we’re just trying to change that going from zero to one is the hardest part.

Fiona Ma (27:10):

And we’ve actually gone out and done interviews like here in Sacramento. There’s a very popular restaurant called Sell-ins and we did a press conference with them and one of the managers was interviewed and she totally forgot about it. When she was hired, she set it up, she forgot about it. And when she went to look at her account, when she was doing her interview, she was pleasantly surprised and she said, “I’m going to put more money into it. ” So that was working.

Steve Chen (27:40):

Totally happens. I mean, I had this experience too, even though our company creates financial planning and retirement planning software, like your narrative and story is right, we were kind of bootstrapping it. We didn’t really have a 401k, even though we’re in this business, we didn’t have a 401k. And I was like, “We’re not super proud of that. ” And so a few years ago, we put that in place and matching. And then what’s really interesting is start saving and not thinking and just have it in the market and don’t think about … Obviously, we’ve had a few good years here of great returns, but you kind of look at it and you’re like, “Wait a sec, this is starting to be a material amount of money.” And so hopefully that kind of feeling starts to happen for a lot more California residents here. So I was looking at data.

(28:33):

There’s 40 million people roughly in California, 20 million in the workforce, it looked like seven million had no access to retirement savings. So sounds like you’ve addressed this for 10% of that population, which is good, definitely. Where do you want this to, in five years, what does this look like?

David Teykaerts (28:52):

So for us, I would say that seven million has actually come down as we look at stats around, like I said, the increase in access for people that aren’t even CalSavers participants. But for us, our serviceable obtainable market here over the next three to five years is 1.5 million savers.

(29:13):

And so for us, that’s going to be roughly twice where we are right now. So we’re right around 605,000. And so for us, it’s just going to be ongoing work. We’re now in that place, we are now fully in effect, really given the size of California, the just limits on the number of human beings we have working here, the amount of mailing to … We rolled out the mandate. When I say mandate here, it’s the requirement for the employer on the employer to take action by certain times that we just passed the fourth and final wave, which was for businesses with as few as one single employee who is not the sole proprietor or the proprietor’s spouse. So it started with a hundred or more employees, 50 more employees, these five or more employees, as you can imagine, that’s a pretty wide pyramid there from a hundred employees or more to one employee.

(30:08):

We were a little bit surprised. There was more than we thought. There’s 600,000 businesses in that category in California alone. I mean, this is the tiniest of the tiny shops and these businesses, these entities come and go. They pop in and out of existence, they reconfigure. And so part of a big challenge for us is just knowing who the heck … It’s like whack-a-mole, where are the … What’s your address? We learn about their existence on a lag from their records with EDD, which does unemployment insurance and other things. And so we’re actually about 18 months behind in terms of knowing does the business exist and then how many employees do they have? And then by the time we get to them, those numbers are changing. So it’s an ongoing thing for us, but we think 1.5 million is a good stretch goal here. We just have to keep in mind that it is still optional.

(31:05):

At the end of the day, it’s optional for that worker. It’s optional for the person. We can opt them in and then a certain percentage is going to opt out. We also have a great degree of know your customer screening that occurs in California where folks, we’re not able to verify socials or other identifiers, not us, but the process. And then that prevents people from participating right away. So

(31:28):

Numbers kind of come down, but our goal is to drive that up, but the employers are the key fulcrum for us. It’s not going to happen if the employer isn’t involved. And I know that because right now, a person who doesn’t have an employer per se, like for example, if you drive for Uber or Lyft, those folks are absolutely able to participate in CalSavers and we have less than 2,000 of them versus the 600,000.

Steve Chen (31:56):

So you have to get Uber out there.

David Teykaerts (31:59):

But even them, they’re independent contractors and that’s a whole different bag of cats here in California. But my broader point is that it’s the reason why this program is constructed the way it is, which is that most people will save to the extent that they have access through it through workplace savings. And if you don’t have a workplace, very few people are going to at least come to CalSavers to save individually. They may be doing it through E-Trade or Robinhood nowadays or whatever, but our program is definitely geared towards the folks who are like-

Steve Chen (32:34):

Do you go talk? Have you gone to talk to Uber about this stuff?

David Teykaerts (32:37):

We have. We have. Their overall position is that that’s a piece that wouldn’t be in place for independent contractors. They’d be happy to put it into their newsletter to their drivers that it’s available, but not a whole lot of appetite just given the construct.

Steve Chen (32:56):

Yeah. Got it. Yeah. I do think so much of this does come down to the employers and the founders. It’s like us. It’s like, okay, well, we’re going to survive. Okay, we should take care of our team. Let’s educate them. And so much of this is literacy too. I’ll share a story. I was in AutoZone or something. I think it was AutoZone. It’s like an auto parts place. And I’m talking to the guy who’s at the counter who turns out to be a manager. He loves his job. He was like, “Yeah, I’m here in my office. I just love hanging out here.” He’s a young guy, late 20s. And I was just asking him about what he did and how he saved. And once I heard his story, he’s like, “Yeah, I’ve got a sister who’s in med school. I’m supporting her. I love this work.” They’ve rolled out a retirement savings program.

(33:46):

I started participating and he had saved up 50,000, 60,000 bucks. And I was like, okay, that’s great. It’s way more than I would’ve thought talking to a retail store manager who was relatively young, but he had gotten into it. He had gotten smart about it, maxed the savings, maxed the matching, invested it efficiently, and you could see that he was proud of it and that he was kind of like an unlock. It’s like Fiona owns this duplex and probably rents out part of it and whatever. It’s like you do these milestones and it’s like, okay, I think that that’s a huge thing. And do you package any literacy with this? Do you give people education?

David Teykaerts (34:33):

Yes. So it’s included in the packet. Let’s back up. In terms of process, so we would contact the employer and say, “You’re subject to the mandate, you need to take action and facilitate access for anyone who doesn’t opt out. ” They upload the roster of their employees and then we would send a packet to that employee, which includes all the details, everything you’d want to know about this, and including links to our websites where we have lots of different financial savings and financial education materials.

(35:04):

It gets some traction, not nearly as much traction as we get from employers looking at all of this. But our program, because it has no fiduciary obligation, it’s outside of ERISA. And so not only are employers not required to educate their workers, they’re actually admonished not to. And that’s a tricky one here where the law is like, “Hey, you just need to be this passive facilitator of this. ” You kind of think about it, you’re like, “What is the dynamic in that actual workplace?” They’re not going to just be covering their hands, but in terms of the legalities of it, it’s us. It’s the program that has to provide that saver encouragement. And I’m of the mind-

Steve Chen (35:45):

You have the fiduciary obligation, basically.

David Teykaerts (35:47):

Yes, we have the fiduciary. And I’m of the mind that sort of like your example and that manager of the retail store, it’s really when people start to see their own money start to grow, that kernel of the magic of compounding interest can start to germinate. You can start to see, oh, I’m not just going to take this out right now to short-term make my life better. I want to continue to ride this. And then maybe … We don’t expect that all of our workers, all of our participants are going to stay in the CowSavers universe forever. We have a lot of folks that are in agriculture, retail, service industry. Many of those folks may go on to work in jobs that have 401ks or more sophisticated products. And we just know this will hopefully have catalyzed that savings mindset because again, this is trying to improve and address the retirement savings crisis for the whole state.

(36:43):

It’s really not about getting as much money into our coffers as we can. We just pump all that money right back into our ecosystem.

Steve Chen (36:52):

It’s about creating awareness. Are you seeing with participants that their behavior is changing? Are you seeing them try to save more, be smart about the money, not hopefully leave it alone or what are some of the things you’re learning?

David Teykaerts (37:07):

They leave it alone. If they don’t take it in the first 90 days, then they leave it alone and just go with it. And that’s California, that’s every other state that runs this program. It’s regardless of what saver campaign you put out, there’s about 35% of people are like, I’m not going to participate or, “Hey, I just noticed that my paycheck is a little bit light. Where did that 5% go? Oh, it’s this. I’m not going to participate right now, but maybe I’ll do it later.” So we try to capture that. But once they get going, once inertia is overcome and you get into the habit, they stick with it. And that’s where we have the other, the nice feature that we have is auto escalation. So the default setting for everybody, if they don’t choose a different one, is 5% of your paycheck. Then after one year, it goes up 1% to six, seven, and then eight.

(37:58):

That’s where current lands. We’re actually seeking legislation to increase that to up to 10% That’s a lot better and drives better outcomes, but it wasn’t in the initial statute, so we’ll have to get that changed.

Steve Chen (38:11):

Well, it’s still great that you have it to have 5% and goes to 8%.That’s pretty material. I mean, I’m sure if you look at this generationally, many people didn’t save enough. And then how about the defaults? Does it default into mostly being invested in the market?

David Teykaerts (38:23):

They fault into target date fund. And depending on your age, if you’re younger, it’s 90% stocks, 10% bonds, and then slowly the glide path changes as they get older.

Steve Chen (38:33):

What are the demographics of your users? Is it mostly younger users because they’re earlier in their career, lower income

David Teykaerts (38:37):

Folks? Yes, it is mostly folks under the age of 45. Our average participant is a 38-year-old Hispanic woman. That’s our most common, but it’s everybody across all kinds of sectors. Awesome. Biggest sectors are getting restaurants, retail, and then medical, lots of small medical related shops out there I’m learning that have between one and 10 employees.

Steve Chen (39:07):

I love it. I mean, it’s great that you guys have done this and that it’s being adopted and you have real usage. I mean, even the scale’s amazing. I think for most companies, you’d be like, “Oh, my serviceable addressable markets, you’re almost halfway there.” I think if for a lot of companies you’re like, “Well, if I can get 5% of the way there, it’s really good business.” Well,

David Teykaerts (39:26):

We have to be honest. I mean, one of the key … I would venture to say, and it’s not the most glamorous piece, but for sure, this is a mandated program. And so this was the original architects. Everybody back to day one in this realized that if we just make this a voluntary offering available to people, frankly, you might as well not do that. I mean, that exists right now through any bank, credit union, a million other … If you’re going to do it as a voluntary thing for people, it’s not going to happen. It’s not going to happen for the employer and it’s not going to happen for the saver. Neither one of them are going to participate. And so my hat’s off to the folks that took the initiative to build in the mandate to this. And this is overcoming some political opposition from De Leon, from the previous treasurer, from other stakeholders where anytime you tell somebody that they have to do something, there’s going to be resistance to that.

(40:23):

And so it took some hotspot to do that. There are real and meaningful consequences for inaction on the employer’s part. If they are adamant in refusing to comply, they neither run our program nor any other eligible program and just refuse to do that, then the penalties are pretty steep. It’s $250 per person for whom they fail to facilitate access.

(40:48):

And then it doubles from there up to $500 more per person.

(40:51):

So I mean, if you have just 10 employees, and that’s one year. So 10 employees, we’re talking about penalties of $7,500 there. That’s not nothing. And it’s just going to keep adding up. And so we don’t want to be about enforcing compliance. That’s less aspirational, obviously, but it’s absolutely essential. You can’t rely on just people looking at data and making the right decisions for themselves. If you could, we would all be thin and healthy and rich. I mean, if it’s not a matter of just knowing what to do, it’s having the system set up such that it’s easy to do it.

Steve Chen (41:29):

Well, I think that is the reason things like social security work is that Medicare work is like, “Hey, you’re defaulted in, you’re contributing,” and then you earn the benefit and it just happens automatically and it’s pretty efficient to run. Exactly.

David Teykaerts (41:42):

I came from pension world. Former life, I was working in the California pension systems and that’s absolutely a foundational principle is that when you go to work for the state, for example, you don’t have a choice. You’re in the CalPERS program. You don’t have a choice on your contribution rate, you don’t have a chance to take it out. I don’t care if someone puts a gun to your head. You cannot cash out your pension until you leave that role. So we’re not nearly that hard line, but the principles are the same. The principles for successful saving are consistency, wise investing, and then just time, allowing time and allowing the compounding effect to kick in.

Steve Chen (42:19):

Yep. Got it. Okay. Well, look, I know we’ve been going for a little while here. I think it’s great that we’ve gotten to cover this and congratulations what you’ve built and seems very material. And I’m glad for both the mostly employees, but also I think it’s great to have employers know that they should do this or do it and then participate in this program. And I think it does … One thing I’ve seen with money is that it has a generational impact. If you start to save and some people will get wealthier and that will help their children and they’ll learn the lessons. They’ll be more literate, which helps the next generation. I think that’s all key. Any kind of top takeaways or resources you want to point our audience to around this?

Fiona Ma (43:05):

We have just two other savings programs if we have a couple minutes. CalABLE is another program that started in 2018, and this is for people with disabilities.

(43:15):

So in the past, if you had a disability or you had a child with disabilities, you could only save up to $2,000 in that person’s name. And now, because of CalABLE, they can save up to $19,000 in that person’s name, in their child’s name. So that has created a sense of security, as well as independence and peace of mind, especially for parents with kids with disabilities. So as of January 1st of this year, the date of onset for the disability increases to 46 years old. The prior date was 26 years old and now 46 years old because people do get sick or hurt later on in life. Maybe it could be on the job, it could be others. And so this is a real game changer. So that is my CalABLE program. And then another program that started during COVID or post- COVID, the governor and legislature put $2 billion into these Cal Kids accounts.

(44:12):

So this is free money

(44:14):

Any first through 12th grader on free and reduced lunch. They are eligible for $500 if they’re a foster youth, another 500, and if they are homeless, another 500. All they have to do is claim it. And it has been so difficult to give away free money when you’re the government because people think, especially now that there’s some sort of hook. So you can go to calkids.org, put in your child’s student ID number, answer a few questions. And if they’re eligible, the money goes into the account. We already know who is eligible, but parents or guardians must claim the account. Got it. Also, newborns born after July 1st, 2022, they’re eligible for anywhere from $75 to $175. And these accounts, you cannot put money in, but we’re really encouraging them to open up a Scholarship 529, link the two accounts so that they are encouraged to start saving.

(45:11):

So again, we have four savings programs. We’re really, really proud and happy and always pushing them out to the community. So we thank you, Steven, for this opportunity. No,

Steve Chen (45:21):

I appreciate it. Yeah, we’ll definitely put links to Cal Savers, CalABLE, the scholar share stuff. So it’s awesome that you’re providing this and hopefully people are taking advantage of it and hopefully people listening. If you know folks that could benefit from this, definitely spread the word and point people to this. A lot of folks in our community, they’re planning, they’re financially literate, they’re planning enthusiasts. A lot of them are CPAs and CFPs. There’s all kind of engineers, all kinds of users. David, anything you want to shout out?

David Teykaerts (45:54):

Yeah, I just want to reiterate that right now, Cal Savers is now the law of the land in California. Again, if you have a job or if you provide jobs, then Cal Savers is now part of the texture of how we need to provide and think about our futures. And again, we’re happy to have you offer any other qualifying plan. This is about addressing the retirement security crisis. And I would just ask your listeners, if you know anybody who runs a business or if you have say younger people that you know, not kids, it’s 18 and over, but younger folks that are early on in their career. And if they’re working in retail or restaurants or anything like that, they’re likely to have an employer who’s offering the program. They should get started early. There’s just really no downside. We try to make it as easy, as low cost, as possible, very competitive with other products out there.

(46:44):

So we’ve moved through our rollout phase and this is going to be the way that it works and in full effect for in perpetuity really here in California.

Steve Chen (46:55):

Awesome. Well, as an entrepreneur that started multiple companies in California, they’re always getting created and it’ll be a good vehicle for people to access, so that’s exciting. Yeah, no, it’s great stuff. And by the way, if you guys ever want to offer financial planning or our tool is free for anybody to create their own financial plan, they can get literate. So maybe it’s a resource for you guys as well. And we can look at incorporating these programs in our platform as well. Okay. Well, look, with that, so Treasure Mafian, appreciate hearing your story and taking the time and to come on here and talk about CalSavers and David as well. It’s great to hear what you’re accomplishing and see government in actions.That’s cool.

Fiona Ma (47:39):

Okay. Thank you. Thank you so much. Thank you.

David Teykaerts (47:41):

My pleasure.

Steve Chen (47:42):

Thanks, David. Appreciate it.

The post Podcast 107: What Happens Next for CalSavers? With Fiona Ma & David Teykaerts appeared first on Boldin.

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