Analysis of the first state-sponsored retirement plan for uncovered workers—OregonSaves—supports earlier findings that auto-IRAs do, in fact, close the coverage gap.

More specifically, a new paper examined Oregon’s program, started in 2017, which requires employers who did not offer any workplace retirement savings plans to automatically enroll employees into a Roth IRA through payroll deduction.

The study assessed the impact of mandated automatic enrollment rather than voluntary automatic enrollment, enabling the examination of changes in employer behaviors for those obliged to introduce automatic enrollment rather than choosing to do it, author Ngoc Dao of the University of Wisconsin, Madison, Center for Financial Security, wrote.

Dao’s paper complements an earlier study by four researchers at the Michigan Retirement Disability Research Center of the University of Michigan who analyzed participation choices, account balances and money going in and out of OregonSaves. They concluded that the program “has meaningfully increased employee savings by reducing search costs.”

Results from Dao’s study found that:

• OregonSaves led to a higher probability of participating in an IRA (an increase of 2.5 percentage points or 12% among eligible workers compared to similar workers in control states).
• The impact was “particularly significant among employees who worked in large firms (firms with over 100 employees), a rise of 5.5 percentage points (or 21%) observed following the implementation of the program.”
• The results also show a “statistically significant increase in household retirement assets (by 3%) and no negative impact on other types of savings following the program’s rollout, suggesting the program created new additional savings.”

However, the paper did note that estimates are smaller than those in previous studies. The fact that the auto-IRA plan under OregonSaves does not have an employer matching feature might be to blame, making it less appealing to workers.

“Larger effects were concentrated among older, female, single, and childless workers and those in lower-income households who were considered less active in savings for retirement in previous studies,” it concluded.

Increased Popularity

According to the Center for Retirement Initiatives (CRI) at Georgetown University’s McCourt School of Public Policy, since 2012, 47 states have either implemented a state-based retirement savings program, studied program options, or considered legislation.

During the 2023 state legislative sessions, at least 22 states have introduced legislation to establish new programs, amend existing programs, or form study groups to explore their options.

Currently, there are 18 states with programs in place; Missouri is the latest, offering a voluntary multiple-employer plan (MEP) 401(k) arrangement. Minnesota also enacted a new auto-IRA program, and Vermont, which previously offered a MEP, converted to an auto-IRA in April.

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