Oregon auto-IRA success shows national program would ‘work well,’ advocate says

Program has amassed nearly $3 million in just a few months.

Oregon’s auto-IRA program has only been around a few months, but its early success demonstrates a similar framework could work at the national level, a proponent said at a congressional hearing Wednesday.

Oregon launched a pilot phase of its automatic-enrollment, payroll-deduction individual retirement account program, called OregonSaves, in July 2017, and officially opened up the program to employers early this year.

The program has amassed just under $3 million, Rep. Suzanne Bonamici, D-Ore., said during the Health, Employment, Labor and Pensions subcommittee hearing. As of May 1, more than 750 employers and 75% of the roughly 44,280 eligible employees had enrolled.

“If we do that on a nationwide basis, your state is illustrating that can work and will work well,” said J. Mark Iwry, a nonresident senior fellow at the Brookings Institution and a deputy assistant secretary for retirement and health policy in the Treasury Department during the Obama administration.

Oregon’s auto-IRA, being rolled out in phases through 2020, is the first such program to be implemented. Four other states — California, Connecticut, Illinois and Maryland — also have passed laws to establish auto-IRAs over the next several years, with the aim of boosting retirement savings. New York intends to offer a plan, too, in coming years.

About 1 million workers in Oregon don’t have access to a workplace plan, according to AARP. That figure rises to about 55 million private-sector workers across the U.S.

Brian Graff, chief executive of the American Retirement Association, said last month that the tax-reform debate had trained Congress’ eye on the issue of retirement savings. He said Congress will likely feel compelled to address the workplace retirement-plan coverage gap, perhaps through a federal program.

Rep. Richie Neal, D-Mass., and Sen. Sheldon Whitehouse, D-RI, introduced legislation to establish a federal auto-IRA program last year. It has not come up for a vote.

The state auto-IRAs each work similarly: States require employers to offer a workplace savings plan, whether a 401(k), the auto-IRA overseen by the state or another plan. Employers who select the state auto-IRA option, which is administered and managed by companies in the private sector, must only facilitate payroll deduction for their employees.

“We can simulate the 401(k) experience most of us are fortunate to have through IRAs,” Mr. Iwry said.

Auto-IRAs use the “building blocks” of the current system — the payroll system, automatic enrollment and tax-favored accounts — which have bipartisan consensus, he said.

But not everyone believes the auto-IRA concept, which has been around for more than a decade, is the best way to improve retirement security.

The Labor Department under President Barack H. Obama issued a rule meant to promote adoption of auto-IRAs by various states; it issued a separate one for cities. The Trump administration took those measures off the books, though states are continuing to move forward despite the setback.

Many Republicans in Congress as well as many financial industry groups instead push open multiple employer plans, which have broad bipartisan support, as a way to increase retirement-plan access for employees of small businesses. Such plans would allow unrelated employers to band together a form a common 401(k)-like plan, seen as a way to reduce administrative burdens and lower costs.

Other states are trying different approaches. Washington and New Jersey are implementing marketplaces to make it easier for small employers to shop for workplace retirement plans.

But auto-IRA proponents, like Mr. Iwry, believe the workplace retirement-plan coverage gap won’t improve much without a requirement that employers take action.

“If we really want to move the needle, we have to grab the bull by the horns and follow Mr. Neal’s [lead],” Mr. Iwry said.