Dive Brief:
- The ERISA Industry Committee filed a federal lawsuit last month against the state of Oregon over its government-backed retirement program for private-sector workers, OregonSaves, The New York Times (NYT) reports. Oregon is the first state to offer a retirement savings plan to employees who lack access to an employer-sponsored plan.
- Some businesses oppose OregonSaves, saying it requires additional administrative tasks, while others oppose states running a retirement-savings plan for private employees in principle. Account holders have 5% of their gross earnings automatically deducted into low-cost investment funds under OregonSaves.
- Oregon has a heavy concentration of small businesses, with many unable to offer their employees retirement savings plans. So far, 75% workers automatically enrolled in the program since July have stayed with it, and about 2,400 employees working for over 50 employers have saved nearly $200,000, NYT says.
Dive Insight:
State-initiated retirement savings plans are examples of states adopting pro-worker policies, despite inactivity at the federal level. In addition to Oregon, several other states plan to implement similar retirement savings arrangements over the next five years.
State-run retirement savings plans replicate the auto-IRA plans that the Obama administration announced in late 2016. The Trump administration and GOP senators vowed to block state auto-IRAs in March, citing administrative burdens on employers and the potential for such plans to skirt regulations on IRAs. Since then, more states have stepped in with their own programs.
Regardless of the methods used to get workers to save, analysts largely agree that American workers face an uphill battle in saving for retirement. That's evidenced by the amount of workers across generations who feel they'll have to postpone retirement out of economic necessity. Other speakers have questioned the present model of retirement altogether, citing longer lifespans and higher amounts of older age workers in gig economy work as signs that employers should rethink their approach to the subject.
Auto-IRA plans, moreover, may appeal specifically to small businesses that can't afford the extra spend to manage them. Employers across the spectrum should refocus their efforts around financial education in order to provide easy, accessible ways for workers to save for their futures.
