First State Auto-IRA Program Off to 'Promising Start'

Under the OregonSaves program, 5% of a an employee’s pay is automatically invested in the retirement savings plan initially, and the contribution rate increases by 1% per year until it reaches 10%. The automatic contributions are designed to ensure that a 25-year-old participating in the program will save enough to retire at age 67 and replace 80% of her income.

For the first 30 days, however, the first $1,000 in contributions are invested in a capital preservation fund so that employees who opt out can reclaim their funds; the remaining deferrals are invested in an age-based target date fund.

Eventually as many as 500,000 employees will be eligible for the program on an opt-out basis. In addition, self-employed workers and employees at firms who are ineligible for their company’s 401(k) program will be able to participate on an opt-in basis.

Through mid-November, employers with 50 or more employees were eligible to participate in the OregonSaves plan, but as of mid-December employers with 20 or more employees will be eligible, followed by employers with even fewer workers.

The CRR report concludes that “important assumptions about how workers would react to the availability of auto-IRAs appear to be holding up,” but employers unfamiliar with the program could use some help “to provide timely and accurate data, process payroll deductions and stay on top of changes to employees and payroll deductions.”