A state-run retirement savings program can provide “significant benefits” for workers whose employers don’t offer plans, according to a study of a model in Oregon recently published in Contemporary Economic Policy.
OregonSaves started in 2017 as a way to help workers save when their employers do not offer a workplace retirement plan and for self-employed individuals. As part of the state-run retirement savings program, businesses that do not offer retirement plans are required to automatically enroll employees in a Roth Individual Retirement Account via payroll deduction with a default rate of 5%. Workers can opt out at any time.
“State-mandated retirement savings policies are an effective tool to narrow savings gaps, especially among low-income workers,” author Ngoc Dao, PhD, of Kean University, said in a press release issued in conjunction with the study. “The Oregon model proves significant public policy gain in boosting savings for retirement among workers who lack access to workplace retirement savings plans.”
According to the study, the program “substantially boosted” retirement savings among workers who previously had lacked a savings program with their employers. Enrollment in an IRA among Oregon’s workforce has increased by 12% since the rollout of OregonSaves. The biggest gains were among workers who were older, lower-income or single, according to the research.
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