Oklahoma bills show auto-IRAs making headway in non-blue states

Oklahoma’s legislature is considering two bills that would establish an auto-IRA program for private-sector workers.

The state is the latest among many that have taken steps to institute such systems, which are intended to dramatically expand access to retirement savings at work for small business employees.

Earlier this year, legislators in the state’s house and senate introduced bills, both dubbed the Oklahoma Prosperity Act, that would mandate auto-IRA participation for all employers in Oklahoma that have 10 or more workers, have been in business for at least two years and do not already offer a retirement plan.

The law would go into effect Nov. 1, and the auto-IRA program would launch within two years after that, though it would likely use a staggered rollout process similar to programs in other states, according to text of the measures. Initially, larger employers would be required to sign up, and smaller businesses would face a later deadline to comply.

Employees would be enrolled automatically at a 3% contribution rate, though they could change that or opt out of the program altogether. Employers would not be considered fiduciaries.

The fact that Oklahoma is considering such a law says much about the progress of state-sponsored retirement programs for private workers. Other programs are already up and running in more Democratic-leaning states like Oregon, Illinois and California. But the fact that Oklahoma is moving toward an auto-IRA is a very positive sign for the programs overall, said Angela Antonelli, executive director of Georgetown University’s Center for Retirement Initiatives.

Last month, Virginia also moved forward with auto-IRA legislation, sending bills to the governor.

“There has always generally been bipartisan support for these programs,” Antonelli said. “Out of the trajectory of the Covid pandemic … there has been a greater appreciation for the value of saving.”

In Oklahoma, less than half of the state’s 1.27 million private-sector workers have access to retirement savings plans through their employers, according to a recent report from Georgetown CRI. An auto-IRA program that would require all businesses to participate would cover an additional 438,000 people, though that total would be lower, at 327,000, if employers with fewer than 10 workers are exempt, the report found.

States that have established auto-IRA systems have been confident that they are on strong legal ground and that the programs are not covered by the Employee Retirement Income Security Act, Antonelli said. That view has been challenged, however, and California is still fighting a lawsuit brought by a conservative tax group that has maintained that the state's CalSavers program is preempted by ERISA.

The Trump administration backed the Howard Jarvis Taxpayers Association in that case, writing an amicus brief supporting its claims to an appellate court. This year, the Biden administration withdrew its support for that court filing, though the Trump administration's brief could still be considered by the court.

“Clearly, with the CalSavers case and the incoming Biden administration moving quickly to take a neutral position and communicate that … [there] has been a signal to the states, of encouragement to go ahead and feel comfortable moving forward with these programs,” Antonelli said.