My career, and the careers of many of the employees working in our office, is dedicated to helping design and maintain effective retirement savings programs for employers and their employees. Changes in the design of these programs, automatic enrollment, automatic escalation, and better default investments have significantly improved plan effectiveness. However, despite these changes, the employer based retirement system continues to have one glaring failure – coverage.
According to the Estimates from the Survey of Consumer Finances, 2001 – 2013, only 68% of working Americans have access to an employer sponsored retirement plan. This leaves a huge part of the country vulnerable to retirement preparedness gaps. To combat this glaring weakness in the system, many states are implementing state run savings programs allowing, or requiring, employers without retirement savings programs to adopt the state program.
While we work with clients from coast to coast, we are headquartered in Portland, Oregon and as such we are proud to see the launch of Oregon Saves, an employer-based IRA retirement savings program. The program is the first of its kind in the country and will begin accepting contributions in July. While Oregon Saves will not impact the majority of employers with retirement plans, there are potential impacts for plans with long eligibility periods; however, it may improve plan access throughout the state.
Supreme Court Justice Louis Brandeis once referred to states as the “Laboratories of democracy.” Oregon Saves and similar programs across the nation are important to the viability of the employer centered retirement savings structure. Without solving the coverage issues of small employers, 401(k) plans and other comparable programs will face deserved criticism for being inadequate in our current economy.
We want to see all Americans have access to the resources necessary to obtain a successful retirement, and as a result we wish the Oregon Saves team, and other like teams across the country, the best of luck as they work to plug this hole.