Summary
The OregonSaves program began in July 2017 to provide defined contribution (DC) plan coverage for those workers in the state of Oregon who are not currently eligible for an employer-sponsored DC plan. The program requires employers to automatically enroll workers into a post-tax individual retirement account (IRA). The program’s default contribution rate is 5 percent; contributions automatically increase by 1 percent each year until they reach 10 percent (unless the employee opts out of automatic increases). Employees can opt out of the program or choose a savings rate of as little as 1 percent and as much as 100 percent of gross pay, up to annual Roth IRA contribution limits.
With more than a year of experience with the OregonSaves plan, the Employee Benefit Research Institute (EBRI) asked the question: What if OregonSaves were a national program? How would that impact the retirement security of American workers? We further asked how a national version of OregonSaves would compare with nationwide implementation of 401(k) safe harbor plans among employers who do not currently offer a defined benefit (DB) or DC plan. We examined both using EBRI’s Retirement Security Projection Model® (RSPM). The incremental benefit of including a full auto portability system in addition to these changes was also simulated.
We found that the “national” OregonSaves plan would provide a 16.3 percent reduction in retirement deficits (as measured by the average retirement savings shortfalls (RSS)) for the youngest age cohort simulated (those currently ages 35–39). The reduction would be smaller for those closer to age 65, with the reduction being only 3.1 percent for those currently ages 60–64. Overall, this would reduce the simulated retirement deficits by $456 billion, or 12 percent of the $3.83 trillion under the baseline assumptions.
In contrast, the 401(k) safe harbor plan expansion would reduce the retirement deficits for the youngest cohort by an additional 8.8 percentage points (for an overall reduction of 25.2 percent). The additional reduction for those ages 40–44 would be slightly higher (9.2 percentage points), but by ages 60–64 the additional reduction would only be 2.5 percentage points. Overall, this scenario would reduce the simulated retirement deficits by $645 billion, or 17 percent of the $3.83 trillion under the baseline assumptions.
Finally, we added a full auto portability scenario to both of the access expansion scenarios. Under the “national” OregonSaves plan with a full auto portability scenario, simulated retirement deficits would be reduced by $759 billion, or 20 percent of the $3.83 trillion under the baseline assumptions. Under the 401(k) safe harbor plan expansion with a full auto portability scenario, simulated retirement deficits would be reduced by $1,031 billion, or 27 percent of the $3.83 trillion under the baseline assumptions.