Oregon becomes first state to launch auto-IRA program

Some see the implementation as a watershed moment for these retirement plans

Jul 5, 2017 @ 5:20 pm

By Greg Iacurci

Oregon has become the first state to launch an automatic-enrollment, payroll-deduction IRA program, known as an "auto-IRA," for private-sector workers. It brings to fruition a concept that's been discussed among policymakers for more than a decade, and represents a shot of sorts at the Trump administration.

A pilot phase of the state's auto-IRA program, OregonSaves, began Saturday with more than 10 participating employers. It is scheduled to roll out in phases, starting with larger employers in early 2018, ultimately coming on line for all employers in 2020.

"I do not think it can really be understated: Oregon is a watershed moment for this movement," said Sarah Gill, a senior legislative representative for government affairs at AARP.

Four other states — Illinois, California, Connecticut and Maryland — have passed legislation to create similar auto-IRA programs, in a play at boosting retirement-plan coverage through the workplace and ultimately boosting retirement security.

Illinois was the first state to pass legislation establishing such a program. It looks set to go live with its auto-IRA in early 2018, with California and Maryland likely following shortly behind in late 2018 or early 2019, and Connecticut a bit further behind, Ms. Gill said.

Auto-IRA programs generally mandate that private-sector employers offer a retirement plan to employees, whether a private-sector option such as a 401(k) or the state auto-IRA, which is largely hands-off for employers other than facilitating payroll deduction.

"I do think it's significant. Now we're going to start learning how well all these work," Aron Szapiro, director of policy research at Morningstar Inc., said of Oregon's launch. "This is something the policy community has been talking about for going on a decade, and now we're going to have one."

Critics of the programs, such as the Investment Company Institute, Insured Retirement Institute and Financial Services Institute Inc., say the auto-IRAs will lead to a patchwork of plans nationally, provide a competitive advantage over private-sector retirement plans, and reduce investor protections.

The Trump administration undid an Obama-era regulation promoting establishment of auto-IRAs by the states. States such as Oregon that have already passed legislation to create the programs have vowed they'd move forward despite this outcome.

Observers believe the legality of programs such as Oregon's will be tested in the courts.

Other states, such as Washington, New Jersey, Vermont and Massachusetts, have passed legislation to create additional types of state retirement programs from auto-IRAs, such as retirement-plan marketplaces or multiple employer plans.

0
Comments

What do you think?

View comments

Most watched

INTV

How the 2020 elections could impact ESG investing

Joseph Keefe, president of Impax Asset Management, on the elections and how advisers can build a bridge to the next generation of clients with ESG investing.

INTV

How advisers can be a gamechanger for women investors

Why women defer to men when it comes to finances and how advisers can combat this phenomenon and make a difference for female investors, according to Heather Ettinger, founder and CEO Luma Wealth Advisors.

Latest news & opinion

Charles Schwab reportedly in talks to buy USAA brokerage, wealth management business

The deal would net Schwab roughly $100 billion in new assets.

Advisers scramble to help retirees navigate looming Fed rate cut

The Fed's first interest-rate cut in a decade has advisers warning against chasing the bait of risk over safety.

CFP Board to announce possible delay of new fiduciary standard

Organization's CEO confirms meeting with Edward Jones, says broker-dealer still considering how to move forward.

Departure of Alexander Acosta could slow DOL effort to revise fiduciary rule

Acting secretary Patrick Pizzella will have to make political decision to move ahead.

SEC member Peirce to brokers: Talk to us early, often about Reg BI implementation problems

She's willing to advocate for additional compliance time if firms have made a good faith effort.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print