Expanding Participation in Retirement Savings Programs

thumbnail retirement securityMany Americans approach retirement with little or no savings. For National Save for Retirement Week, today’s WatchBlog explores why people aren’t saving for retirement and what some states are proposing to help fix that.

They would if they could

Roughly half of private sector workers aren’t participating in a workplace retirement savings program. Of those, 16% chose not to, but the rest can’t because they don’t have access to these programs. Here are some reasons why:

  • Their employers don’t offer a retirement savings program. Employer size has a big effect here—workers at the largest firms are more than 9 times as likely to have a program offering compared to workers at the smallest firms.
  • They aren’t eligible for the program offered, because they don’t meet age or time-in-service requirements.

A state solution?

At least 29 states have studied or proposed ways to expand workers’ access to retirement savings programs. These include encouraging or requiring employers to offer programs, and automatically enrolling employees in a Roth IRA or other savings plan geared toward retirement.

GAO-15-556 fig. 11(Excerpted from GAO-15-556)

States are also trying to make it easier for employers to offer plans and for workers to understand their options. For example, Illinois is planning to require certain employers to automatically enroll their workers in a state-run retirement savings program. Employees would then have to actively opt out of the program.

GAO-15-556 fig. 9

(Excerpted from GAO-15-556)

Similar programs in the United Kingdom and New Zealand have worked to boost enrollment in retirement programs. More than 5 million workers have been automatically enrolled in the United Kingdom’s plan since it started in 2012. New Zealand’s plan, the KiwiSaver, has added more than 2 million people since 2007.

Not so fast

States face one big hurdle to expanding coverage: the Employee Retirement Income Security Act of 1974, or ERISA. A provision in this law could invalidate state laws related to “employee benefit plans” for private sector workers.

To help address this challenge, the Department of Labor plans to propose a set of rules by the end of 2015, but Congress could also consider providing states limited flexibility to expand private sector coverage.


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