SB 21-AK WORK & SAVE PROGRM; RETIRE. SAVINGS BD  1:51:38 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of SENATE BILL NO. 21 "An Act establishing the Alaska Work and Save Program; establishing the Alaska Retirement Savings Board; and providing for an effective date." CHAIR BJORKMAN stated that a committee substitute (CS) for SB 21 was adopted during the first hearing of the bill. 1:52:18 PM SENATOR BILL WIELECHOWSKI, District K, Alaska State Legislature, Juneau, Alaska, presented a recap of SB 21 and stated that the Alaska Work and Save bill establishes an auto-IRA program for all Alaskan employees, addressing the lack of retirement savings, with over half of American households that do not have a retirement, especially among small businesses, 64 percent of which currently offer no retirement plan. He said the program provides an affordable, simplified savings option, helping small businesses compete for quality talent, supporting Alaskans' financial security, and improving long-term quality of life. He said 70 percent of small businesses would support a savings plan if there were reasonable options. Similar programs exist in 17 other states. 1:53:58 PM CHAIR BJORKMAN announced invited testimony on SB 21. 1:54:10 PM MARGE STONEKING, State Advocacy Director, American Association of Retired Persons (AARP), Anchorage, Alaska, testified by invitation on SB 21: [Original punctuation provided.] AARP is the largest nonprofit, nonpartisan membership organization in Alaska and in the country. Financial security is a key component of our advocacy agenda for Alaskans 50+ and that begins with saving for retirement throughout one's working years. AARP's mission is to empower people to choose how they live as they age. Retirement readiness is a big part of having choices for how one lives in retirement, and Social Security is not enough to live on. Retirement readiness is good for Alaskans and for Alaska. The less retirement income you have the more likely you are to have to rely on public programs like Medicaid, Senior Benefits, and SNAP to meet basic needs. Retirement readiness for the private sector requires a workplace savings option for all employees. The retirement crisis in this country is not a new challenge but one that has persisted for several decades. Today, over half of the nation's households are at risk of not having enough money to maintain their standard of living in retirement and being unable to afford necessities such as food, utilities, and healthcare. Although some individuals are merely not saving enough, a vast number are not saving at all. 20 percent of adults age 30 and older have no retirement savings at all and 14 percent have less than $10,000 saved for retirement. 1:56:07 PM MS. STONEKING continued with her testimony of SB 21: A critical reason for this shortage of savings is that a lack of access to workplace savings plans has remained low for decades. Roughly just half of private-sector workers have access to a way to save from their regular paycheck at work. Employers, particularly small business owners, often cannot provide a retirement plan to their employees due to their confusing, costly, and time-consuming nature. Without access to a retirement savings plan at work, nearly all workers fail to save. AARP Research has found that Americans are about 15 times more likely to save for retirement when they have can do so at work. Work and Save is designed to address the retirement savings gap using tools, such as payroll deduction and automatic enrollment, that are proven to work. Work and Save programs are changing the landscape on retirement readiness by giving businesses an easy, no- cost retirement program and giving workers a portable retirement savings program allowing workers to build the savings they need to be retirement ready. And according to the National Institute on Retirement Security's research on Americans' Views of State- Facilitated Retirement Programs, the vast majority of Americans agree that state-facilitated, privately managed retirement savings programs are a good idea. That support holds across party lines and across generations. This policy has consistent bi-partisan support in polling among the public and small-business owners across the country and across time. And, we know from instate polling that that across political ideology, Alaska small businesses also support a publicprivate retirement savings option. Seven in ten Alaska small business owners support a privately managed, ready-to-go retirement savings option that would help small businesses offer employees a way to save for retirement (Republican: 71 percent; Democrat: 70 percent; Independent: 76 percent). Additionally, most small business owners agree that state legislators should support a bill to make it easier for small business owners to access a retirement savings option for their employees and themselves, such as SB21 does. AARP stands ready to work with the Alaska Legislature to pass Alaska Work and Save so that generations of Alaskans can save and become retirement ready. 2:00:13 PM DAVE YOUNG, Treasurer, Colorado Department of Treasury, Denver, Colorado, testified by invitation on SB 21 and stated that he wanted to focus on page 7, line 14 of the bill which allows through legislation the ability to enter into an agreement with other states to provide services related to retirement age programs. He said Colorado's Secure Savings Program, established by legislation in 2020 and launched in 2023, is a state-run auto-IRA program designed to expand retirement savings. He said Colorado's IRA program created the "Partnership for a Dignified Retirement" to help other states launch programs quickly by leveraging Colorado's procurement work for fund managers, program managers, and consultants. Partner states benefit from reduced costs, shared resources, and lower fees for savers due to negotiated price breaks based on assets under management. He said the program has grown to 75,000 funded accounts and over $100 million in assets, and early partner states are beginning to be successful. The program is designed to complement, not compete with, private sector plans, allowing businesses to choose either option. The goal is to increase regular retirement savings participation, providing a scalable, collaborative model for states struggling to establish their own programs. 2:05:37 PM CHAIR BJORKMAN asked whether participants in Colorado generally keep their funds in their IRA accounts to let them grow long term or do more people withdraw their money early for short-term needs and how has that trend played out. 2:06:07 PM MR. YOUNG replied that since launching in 2023, Colorado's program shows growing average account balances, indicating participants are keeping funds invested rather than withdrawing early. As a Roth IRA, penalties discourage premature withdrawals, and many savers are using automatic contribution increases while retaining flexibility to adjust or opt out. He said overall, the trend suggests people are leaving their money in and letting it grow.  2:08:28 PM CHAIR BJORKMAN asked what is the opt out rate in Colorado. 2:08:33 PM MR. YOUNG replied he will need to consult with his staff on what the opt-out rate is. CHAIR BJORKMAN asked how have employers responded to the program, and what level of time or effort is typically required from employers when processing payroll. MR. YOUNG replied that every potential saver must go through a process called Know Your Customer (KYC), of the people that are cleared by the KYC process, 20 percent of them opt out of the program. He said employers report that the program is quick and simple to use. He said the program was intentionally designed as the "easy button" to reduce administrative burden. Small businesses especially value being able to offer retirement savings as part of compensation, and many employees are excited to save for the first time. While some busy businesses find it challenging to add new tasks, the program has generally been well-received and easy to maintain. 2:11:56 PM SENATOR YUNDT asked if the contributions would be on a pre-tax basis. 2:12:13 PM MR. YOUNG replied that the contributions would be post tax because this program is Roth IRA. 2:12:24 PM SENATOR YUNDT asked if the plan provides different investment options such as low, medium, or high risk, so participants can choose the strategy that best fits their stage of life. 2:12:41 PM MR. YOUNG replied that his office did some research on the different types of options to offer and found that too many investment choices can discourage saving, as people often find the options confusing. He said to simplify, the program provides a default target date fund for long-term growth, while offering limited additional options based on saver feedback to ensure the lineup meets actual demand without overwhelming participants. 2:14:16 PM SENATOR YUNDT asked if there was an employer match option. 2:14:30 PM MR. YOUNG responded that the program is structured as a Roth IRA, so employer matches aren't allowed. While Congress is considering fixes of the SECURE 2.0 legislation through the "saver's match", many small businesses prefer the current setup since they aren't fiduciaries or responsible for matching contributions. He said employers who want to offer matching can instead choose private plans like 401(k)s. Meanwhile, Colorado's plan offers a simple investment lineup, including capital preservation, fixed income, domestic and international equity, and target-date funds. 2:17:08 PM SENATOR YUNDT asked since the fund was created, how has its performance compared to major benchmarks like the Dow Jones or the S&P 500. 2:17:32 PM MR. YOUNG replied that the program is designed for long-term sustainable performance, with fund managers guided by benchmarks developed with investment consultants, while also being measured against major indexes. He stated that the focus of Colorado's retirement programs is long-term investing, not short-term trading. By diversifying portfolios and managing risk, he aims to provide sustainable, reliable returns that people can depend on in retirement.  2:19:28 PM CHAIR BJORKMAN opened public testimony on SB 21. 2:19:44 PM JAYNE ANDREW, representing self, Douglas, Alaska, testified in support of SB 21 and stated that she didn't start retirement planning until her late 30s, having previously worked in small businesses and nonprofits that offered little beyond basic savings options. She emphasized the importance of providing retirement opportunities, recalling how even modest savings were valued by employees. Drawing on family history of financial hardship and reliance on Social Security, she stressed the need to ensure today's workers have secure retirement options as the aging population grows.  2:21:57 PM CHAIR BJORKMAN closed public testimony on SB 21. 2:22:10 PM CHAIR BJORKMAN solicited the will of the committee. 2:22:13 PM SENATOR MERRICK moved to report CSSB 21, work order 34-LS0254\N, from committee with individual recommendations and attached fiscal note(s). 2:22:28 PM CHAIR BJORKMAN found no objection and CSSB 21(L&C) was reported from the Senate Labor and Commerce Standing Committee.